Arthur M. Evans, Jr. v. Della M. Evans ( 2002 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-01-00281-CV
Arthur M. Evans, Jr., Appellant
v.
Della M. Evans , Appellee
FROM THE DISTRICT COURT OF CALDWELL COUNTY, 207TH JUDICIAL DISTRICT
NO. 98-D-276, HONORABLE C. FRED SHANNON, JR., JUDGE PRESIDING
This dispute arises out of a divorce proceeding initiated by appellant Arthur M. Evans, Jr.
Arthur challenges the property division made in the final decree of divorce. By three issues, he attacks the
trial court=s characterization of certain assets and its division of the community estate. We will overrule his
issues and affirm the trial court=s judgment.
FACTUAL BACKGROUND
Arthur and Della Evans were married on September 19, 1997. They separated on August
11, 1998, after about eleven months of marriage. Arthur has owned and operated his own tile business,
which is the primary source of his income, since 1966. Della=s wages were her only source of income. The
parties did not have a joint bank account during the marriage, nor did they purchase any real property.
Arthur, however, had five bank accounts in his name before he and Della were married and opened another
account after they married. This dispute involves the trial court=s division of the funds in these accounts.
Arthur filed for divorce on August 14, 1998, and on December 17, the trial court held a
hearing on temporary orders and ordered Arthur to pay Della $500 per month in temporary support
beginning January 1, 1999, plus moving expenses and interim attorney=s fees. A trial setting was obtained
for June 1999 but was rescheduled after the assigned judge discovered he had a potential conflict with
Della=s counsel. Thereafter, Arthur refused to continue paying temporary support. The parties ultimately
proceeded to a bench trial on September 15, 2000, during which the trial court also considered Della=s
motion to enforce the temporary orders. In the final decree of divorce, the trial court awarded each party
the property in his or her possession and awarded Della $36,188.67 plus interest. Of that judgment,
$8,000 was for unpaid temporary support; the remaining $28,188.67 was found to be Della=s share from
the disputed accounts. Arthur requested findings of fact and conclusions of law, which were not filed.
Arthur now appeals.
DISCUSSION
By his first issue, Arthur argues that the trial court erred in characterizing as community
property gross proceeds from his tile business, which were held in various accounts, by improperly applying
community property tracing principles.
Property possessed by either spouse during or on dissolution of marriage is presumed to be
community property. Austin v. Austin, 619 S.W.2d 290, 292 (Tex. Civ. App.CAustin 1981, no writ).
Separate property consists of property owned by a spouse before marriage, property acquired during
2
marriage by a spouse by gift or inheritance, and recovery for personal injuries suffered by that spouse during
the marriage, with the exception of lost earning capacity during the marriage. Tex. Fam. Code Ann. '
3.001 (West 1998). The party claiming separate property carries the burden of overcoming the community
property presumption by clear and convincing evidence and must trace and clearly identify the property
claimed. Tex. Fam. Code Ann. ' 3.003 (West 1998); Smith v. Smith, 22 S.W.3d 140, 144 (Tex.
App.CHouston [14th Dist.] 2000, no pet.). Clear and convincing evidence means the measure or degree
of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the
allegations sought to be established. Tex. Fam. Code Ann. ' 101.007 (West 1996). A trial court may not
divest a spouse of his or her separate property in dividing property. Cameron v. Cameron, 641 S.W.2d
210, 220 (Tex. 1982); Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 142 (Tex. 1977); Wilkerson v.
Wilkerson, 992 S.W.2d 719, 722 (Tex. App.CAustin 1999, no pet.).
When, as here, the alleged error is the trial court=s mischaracterization of separate property
as community property, we must first determine whether the trial court=s finding is against the great weight
and preponderance of the evidence (factual sufficiency complaint) or the separate property status was
established as a matter of law (legal sufficiency complaint). Tate v. Tate, 55 S.W.3d 1, 6 (Tex. App.CEl
Paso 2000, no pet.). Mere mischaracterization of separate property as community property, however,
does not require reversal. Magill v. Magill, 816 S.W.2d 530, 533 (Tex. App.CHouston [1st Dist.] 1991,
writ denied). The appellant must also prove that a disparity in the division was caused by the
mischaracterization of such property and was so substantial as to constitute an abuse of the trial court=s
discretion. Id. In other words, even if the trial court included separate property in its determination of the
3
value of the community estate, the trial court=s division of the community estate will not be reversed absent a
showing of a substantial disparity in the division caused by the mischaracterization of the property.
The six accounts in dispute are as follows: (1) the Omni Bank Abusiness account,@ (2) the
Omni Bank Asavings account,@ (3) the Omni Bank Ainsurance account,@ (4) the First Lockhart National
Bank Amoney market account,@ (5) the AIRA account,@ and (6) the AWells Fargo business account.@ Arthur
testified about the nature of these accounts, and Della introduced evidence of the balances in the accounts.
According to Arthur, he uses his Omni Bank business account Afor everything@; it is his main
operating account. Arthur testified that he deposits funds for his tile jobs into this account and pays both
business and personal expenses from the account. The beginning balance for this account at the time Arthur
and Della were married was between $24,288 and $29,782.1 The account=s lowest balance during the
marriage was $595. At the time of trial, the balance was $18,070.
Arthur also has a savings account at the Omni Bank. The balance in this account at the time
of marriage was between $60,467 and $61,089. When the parties separated, the account had a balance of
between $56,154 and $63,283.2 The balance at the time of divorce was $68,168. The account balance
dipped to $55,300 during the marriage.
1
Because the parties were married on September 19, 1997, we have included the balances for the
beginning of September and the end of September.
2
Because the parties separated on August 11, 1998, we have included the balances for the
4
beginning of August and the end of August.
5
The insurance account is Arthur=s third account at Omni Bank. According to Arthur, the
sole purpose of this account is to pay for his life insurance policy. He deposits funds into the account from
his business account, and the funds are automatically drafted from his account to pay his insurance
premiums. The account had a beginning balance of $473. It dipped to $386 during the marriage, and had a
balance of $2,364 by the time of the divorce.
The money market account is maintained at First Lockhart National Bank; Arthur testified
that he deposits funds into this account from his business account. As of the date of Arthur=s marriage to
Della, this account had a beginning balance of between $52,100 and $54,300. At the time the parties
separated, the account=s balance was between $67,387 and $71,927. And at the time of trial, the balance
was $77,252.
Arthur also has an IRA account at First Lockhart National Bank. He made annual $2,000
deposits into the IRA account from his business account. At the time he and Della were married, the
account had a balance of $72,419. With the annual deposits and the accrual of interest, the balance grew
to about $75,301 at the time of separation and $91,500 at the time of divorce.
The Wells Fargo business account is the only account that was opened during the marriage;
it was opened primarily for business purposes, according to Arthur. He was anticipating Adoing a lot of
work in the [Kyle] area@ and considering Aputting somebody over there to kind of run things in that area.@
So, he opened a bank account at the Wells Fargo Bank in Kyle to further those intentions. In opening the
account, Arthur claimed to use A[j]ust incoming money I had in my business.@ The account had a beginning
balance of $20,200 and a balance of $32,711 at the time of divorce.
6
Because Arthur commingled funds from his separate business accounts with his personal
funds, all six bank accounts are presumed to consist of community property. Estate of Hanau v. Hanau,
730 S.W.2d 663, 667 (Tex. 1987). In order to dispel the community property presumption, Arthur=s
burden was to present proof illustrating that the separate funds he deposited were never withdrawn. Hill v.
Hill, 971 S.W.2d 153, 158 (Tex. App.CAmarillo 1998, no pet.). This method of tracing relies on two
more presumptions: (1) separate funds deposited in the account sink to the bottom, and (2) community
funds are withdrawn first. Id. Della relied on these tracing principles and on the evidence of the bank
account balances in arguing to the trial court that community assets should be determined by taking the
difference between the balance in the accounts at the time of trial and the accounts= lowest balances during
the marriage.
Arthur, on the other hand, testified that because of the nature of his business, it is impossible
to determine his income by merely considering the balances in his accounts. The balances may not reflect
substantial outstanding overhead expenses. Thus, Arthur proposed that the court refer to his income tax
statements for a more accurate representation of his income. According to these statements, Arthur=s
taxable income for the year 1997 was $32,297. He paid $11,344 in taxes, which results in a net income of
$20,953, plus $2,000 that he deposited into his IRA account, totaling $22,953. In 1998, Arthur=s taxable
income was $25,085, minus $8,555 in taxes, plus the $2,000 IRA deposit, totaling $18,540. Arthur=s
taxable income in 1999 was $28,075; he paid $9,342 in taxes and again deposited $2000 into his IRA
account, for a sum of $20,733. Arthur provided no other evidence of his income aside from his income tax
statements.
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The final decree of divorce awards Della a judgment of $36,188.67 against Arthur, $8,000
of which constitutes unpaid spousal support under the temporary orders. The remaining $28,188.67
represents Della=s share of the community property from the six bank accounts. The decree of divorce
does not disclose the trial court=s method in calculating these figures. And the court did not file findings of
fact and conclusions of law in relation to the property division.3 Nonetheless, Arthur directs this Court to
the trial court=s comments before the rendition of the divorce decree, explaining his method in determining
the community estate:
This is the way that I see it: With regard to the Omni business account, I think that I
can allow only 14 percent of that as community. That would be $2,443.88. That
represents the most recent year=s percentage of net profit on the operation of the business.
The Wells Fargo account, $32,711, the same consideration applies. Fourteen percent is
$4,579.54. With regard to the other accounts, that consideration does not apply.
3
It appears from the clerk=s record that Arthur requested findings of fact and conclusions of law,
but did not timely file his request. The trial court, however, concluded that Arthur did not timely receive
notice of the final divorce decree. Therefore, because he had not received notice of the decree and because
his request was filed before the trial court=s plenary jurisdiction expired, the trial court considered Arthur=s
request for findings of fact and conclusions of law timely filed. Nevertheless, the only findings and
conclusions filed by the trial court were those relating to Arthur=s failure to receive notice of the decree and
the timely filing of his request for findings and conclusions. Arthur did not file a notice of past due findings of
fact and conclusions of law in relation to his original request for findings and conclusions regarding the merits
of the case. See Tex. R. Civ. P. 297.
8
The money market funds, I believe, represent a savings account. I think that the
community portion of that account is $25,125. The IRA, I believe -- the community
portion of that account is $19,081. The Omni savings account -- I believe that the
community portion of that is $12,868. The insurance account -- I believe the community
portion of that account is $1,978.
The total, therefore, of the funds on deposit which appear to be a part of the
community estate, same being enhancements to the account since date of marriage and
measured from the low point in those savings accounts is $66,077.34, the $66,077.34
representing community property.
There is an $8,000 arrearage to the spouse on a temporary support order. That
should be paid from the community. That reduces the community balance, after payment,
to $58,077.34. Of that amount, the husband is entitled to recover $1,500 on income tax
payments and $200 on the hot check settlement. That reduces the community amount to
$56,377.34.
. . . I think an equal division of the cash balance of $56,377.34 is appropriate.
Arthur=s complaints about the court=s calculations are two-fold. First, he argues that the trial
court should have considered only his income tax statements in determining which funds are community
assets. In the alternative, the trial court should have applied the fourteen percent multiplier to all of the
accounts instead of only to the two business accounts. In essence, Arthur contends that the trial court=s
characterization of the property is against the great weight and preponderance of the evidence. We
disagree.4
4
We note that even if Arthur=s assertion were correct and the trial court had mischaracterized his
9
separate property as community property, he would still have to prove that this mischaracterization resulted
in a substantial disparity in the trial court=s division of the property so as to constitute an abuse of discretion.
As previously stated, absent such a showing, we will not reverse the trial court=s judgment. See Magill v.
Magill, 816 S.W.2d 530, 533 (Tex. App.CHouston [1st Dist.] 1991, writ denied).
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We review the trial court=s findings on characterization of property under a factual
sufficiency standard in light of the proponent=s burden of proof at trial. Tate, 55 S.W.3d at 5. Arthur=s
burden of proof at trial was to establish the separate nature of his property by clear and convincing
evidence; thus, on appeal, we must consider all the evidence and determine whether the fact finder=s failure
to find in Arthur=s favor is so against the great weight and preponderance of the evidence as to be manifestly
unjust. Leal v. Texas Dep=t of Protective and Regulatory Servs., 25 S.W.3d 315, 320 (Tex.
App.CAustin 2000, no pet.); Tate, 55 S.W.3d at 5. In doing so, we cannot substitute our conclusions for
those of the fact finder. Tate, 55 S.W.3d at 5. Nor may we interfere with the fact finder=s resolution of
conflicts in the evidence or pass on the weight or credibility of the witnesses= testimony. Id.
Where no findings of fact and conclusions of law are filed, the reviewing court infers that the
trial court made all findings necessary to support its judgment, and the trial court judgment will be affirmed
on any legal theory supported by the evidence. Wilkerson, 992 S.W.2d at 722. We may not consider the
trial court=s comments as a substitute for findings of fact and conclusions of law. In re W.E.R., 669 S.W.2d
716, 716 (Tex. 1984). Absent findings of fact and conclusions of law, there is no indication of how the trial
court calculated community assets.
Even if we were to consider the trial court=s comments, however, Arthur failed to satisfy his
burden of tracing his separate property. Arthur testified that due to the nature of his business, it is
impossible to determine which funds belong to his separate tile business. Arthur argues that he often
transferred funds back and forth from his savings and money market accounts and operating accounts as his
balances allowed and required for payment of his business and living expenses. He contends that just
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because money goes into an account does not mean that it is earned income that should be classified as
community property. Thus, according to Arthur, the Aonly solid evidence in the file, the income tax return,
and [Arthur=s] testimony established this fact clearly.@
As previously stated, when separate and community funds are commingled in a manner
defying segregation, it is presumed that the entire fund consists of community property. McElwee v.
McElwee, 911 S.W.2d 182, 188 (Tex. App.CHouston [1st Dist.] 1995, writ denied). Once Arthur
commingled his separate funds with community funds, presumptively, the character of those funds changed
and became community funds. As the party attempting to overcome the community property presumption,
Arthur was required to produce clear and convincing evidence of the transactions affecting the commingled
accounts. See McKinley v. McKinley, 496 S.W.2d 540, 543-44 (Tex. 1973); Welder v. Welder, 794
S.W.2d 420, 434 (Tex. App.CCorpus Christi 1990, no writ). This he failed to do. Arthur made no
attempt to trace any of the separate funds in the six accounts, or to identify any amount claimed to be his
separate property. The only evidence provided by Arthur were his income tax statements. While these
statements may have provided some evidence of his average taxable income during the years he was
married to Della, they are inconclusive as to the nature of the funds deposited or withdrawn. Arthur offered
no financial statements evidencing outstanding expenses or expected income. We cannot say that Arthur
sustained his burden of overcoming the community property presumption by clear and convincing evidence.
In contrast, Della offered account summaries reflecting the balances in the six accounts from
the date of marriage through the date of divorce in order to defeat the community property presumption and
segregate Arthur=s separate property. It appears the trial court used these account summaries in
12
conjunction with Arthur=s income tax statements in determining the community funds. This is evidenced by
the trial court=s determination that only fourteen percent of the balances in the two business accounts
constitute community funds. We hold that the trial court=s assessment that $56,377.34 of the funds
represent community property is not so against the great weight and preponderance of the evidence, in light
of the presumption, as to be manifestly erroneous or unjust. Accordingly, we need not reach the issue of
whether any mischaracterization of the property resulted in a substantial disparity in the division of the
community estate. Arthur=s first issue is overruled.
By his second and third issues, Arthur argues that the trial court erred in failing to order
reimbursement to his separate estate for funds used to pay community expenses.5 He also argues that the
trial court abused its discretion by failing to make a fair and equitable division of the parties= community
property. Because he argues these two points together, we will address them together.
In granting a divorce, the trial court Ashall order a division of the estate of the parties in a
manner that the court deems just and right.@ Tex. Fam. Code Ann. ' 7.001 (West 1998). The trial court
enjoys broad discretion in dividing the property. Murff v. Murff, 615 S.W.2d 696, 698 (Tex. 1981). We
will reverse only if we determine the trial court clearly abused its discretion. Id. A clear abuse of discretion
5
Arthur also argues that the trial court erred in failing to properly account for funds as gross
proceeds of a separately owned business rather than net divisible community property. Because we have
already held that Arthur failed to provide evidence tracing those funds to his separate property, i.e., his tile
business, the trial court did not abuse its discretion in presuming those funds to be community property.
13
is shown only if the property division is manifestly unjust and unfair. Mann v. Mann, 607 S.W.2d 243, 245
(Tex. 1980). The party attacking the trial court=s property division bears the burden of demonstrating from
evidence in the record that the division was so unfair and unjust as to constitute an abuse of discretion.
Wilson v. Wilson, 44 S.W.3d 597, 600 (Tex. App.CFort Worth 2001, no pet.); Finch v. Finch, 825
S.W.2d 218, 221 (Tex. App.CHouston [1st Dist.] 1992, no writ).
A party claiming the right of reimbursement has the burden of pleading and proving that the
expenditures were made and that they are reimbursable. Vallone v. Vallone, 644 S.W.2d 455, 459 (Tex.
1982). Arthur failed to plead reimbursement before the trial court; he cannot urge reimbursement for the
first time on appeal. See Gay v. Gay, 737 S.W.2d 94, 96 (Tex. App.CEl Paso 1987, writ denied).
Moreover, although Arthur provided some evidence of the amounts of community expenses and debts, he
did not provide evidence demonstrating that his separate funds were used to pay those expenses and debts.
Community funds are presumed to be withdrawn first. Thus, it is presumed that community expenses were
paid with community funds absent clear evidence that there were no community funds in the accounts at the
time the expenses were paid. See Kuehn v. Kuehn, 594 S.W.2d 158, 161 (Tex. Civ. App.CHouston
[14th Dist.] 1980, no writ). Arthur has failed to present such clear evidence rebutting the presumption.
Arthur also argues that the community estate should have been determined according to the
income and expenses up until the time the parties separated, and the trial court erred in considering the
account balances at the time of the divorce. Because Arthur and Della remained married even after they
separated until the date of their divorce, the property they continued to acquire between the date of
separation and the date of divorce was still considered community property, unless Arthur could establish
14
that the property was his separate property. Wilson, 44 S.W.3d at 601. Arthur provided no evidence that
any property acquired after the parties separated was separate property. Arthur=s final two issues are
overruled.
CONCLUSION
Having overruled all of Arthur=s issues, we affirm the trial court=s judgment.
__________________________________________
David Puryear, Justice
Before Chief Justice Aboussie, Justices B. A. Smith and Puryear
Affirmed
Filed: June 21, 2002
Do Not Publish
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