in the Interest of M.H.A, and Z.H.A., Children

AFFIRMED and Opinion Filed July 7, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-20-00787-CV
IN THE INTEREST OF M.H.A, AND Z.H.A., CHILDREN
On Appeal from the 296th Judicial District Court
Collin County, Texas
Trial Court Cause No. 296-53533-2018
MEMORANDUM OPINION
Before Justices Partida-Kipness, Reichek, and Goldstein
Opinion by Justice Partida-Kipness
In this divorce case, appellant Husband challenges a disproportionate division
of the marital estate in favor of Wife based on the finding that Husband committed
constructive fraud. He also disputes the trial court’s finding that he used his company
as his alter ego and the award of certain financial assets to Wife without evidence of
their valuation. We affirm the judgment in all respects.
BACKGROUND
Husband and Wife were married in 1997. In 2018, Husband filed for divorce.
He did not serve Wife with the petition, though, and he took a default judgment of
divorce against her that named him as sole managing conservator of their children
and awarded him nearly all the family property. Wife discovered Husband’s
maneuver and had the divorce decree set aside through a bill of review in 2020. She
counterpetitioned for divorce and sought a finding that Husband had committed
actual and constructive fraud on the marital estate through a series of dubious
financial transactions.
At trial, much of the evidence focused on Husband’s withdrawals of
community funds and transfers of money, real property, and other community assets
to himself or his family members. Husband maintained that Wife knew about and
approved the withdrawals and transfers, many of which he testified were made for
legitimate family reasons. Other transfers, Husband explained, were made in
connection with his home-renovation business, Renaissance Rebuilding, LLC. Wife
denied that she had any foreknowledge of the transfers, testifying that she generally
left Husband in charge of the family’s finances. She disputed Husband’s
explanations for the transfers and stated her belief that Husband was hiding assets.
Wife also introduced evidence that showed Husband had received distributions from
an undisclosed IRA account, though Husband continued to deny that he had any such
account.
After hearing the evidence, the trial court granted a divorce. The resulting
decree gave Wife a disproportionate share of the property division based in part on
Husband’s constructive fraud against the marital estate. Within the division, the trial
court awarded Wife all individual retirement accounts, pensions, annuities, and
annuity life insurance benefits in Husband’s name. The trial court rendered findings
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of fact and conclusions of law. Among them was a determination that Husband used
Renaissance as his alter ego and, as a result, a piece of real property belonging to
Renaissance could and should be awarded to Wife. Husband appeals.
STANDARD OF REVIEW
We review the trial court’s division of a community estate for an abuse of
discretion. Slicker v. Slicker, 464 S.W.3d 850, 857 (Tex. App.—Dallas 2015, no
pet.). In family law cases, the abuse of discretion standard of review overlaps with
the traditional sufficiency standards of review. Id. As such, legal and factual
sufficiency are not independent grounds of reversible error but instead constitute
factors relevant to our assessment of whether the trial court abused its discretion. Id.A trial court does not abuse its discretion for want of evidence if there is some
evidence of a substantive and probative character to support the decision. Id.In an appeal from a bench trial, we review a trial court’s conclusions of law
de novo and will uphold them on appeal if the judgment of divorce can be sustained
on any legal theory supported by the evidence. Reisler v. Reisler, 439 S.W.3d 615,
619 (Tex. App.—Dallas 2014, no pet). We review the trial court’s findings of fact
under the same standards for sufficiency that govern the review of jury findings,
giving deference to the trial court’s determination of the weight and credibility of
the evidence. Id. at 620. In evaluating a legal sufficiency challenge, we credit
evidence that supports the finding if a reasonable fact finder could, and disregard
contrary evidence unless a reasonable fact finder could not. Id.
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A party seeking to disregard corporate formalities bears the burden of proving
that the company is an alter ego of another person or entity. Fuentes v. Zaragoza,
555 S.W.3d 141, 169 (Tex. App.—Houston [1st Dist.] 2018, no pet.). We review
conclusions of law regarding alter ego de novo to determine their correctness as
applied to the facts. Id. We review the evidence underlying findings of fact for legal
and factual sufficiency under the same standards applied in reviewing evidence
supporting a jury’s findings. Id. We sustain a no-evidence challenge when the record
reveals either (1) a complete absence of evidence of a vital fact, (2) the court is barred
by rules of law or evidence from giving weight to the only evidence offered to prove
a vital fact, (3) the evidence offered to prove a vital fact is no more than a scintilla
of evidence, or (4) the evidence establishes conclusively the opposite of a vital
fact. Id.ANALYSIS
I. Constructive Fraud
In his first issue, Husband disputes the trial court’s decision to award Wife a
disproportionate share of the community estate based on its determination that
Husband committed constructive fraud. Husband contends that Wife introduced no
evidence of the kind that may sustain a constructive fraud finding.
In a divorce decree, the trial court shall order a division of the marital estate
in a manner that the trial court deems just and right, having due regard for the rights
of each party. TEX. FAM. CODE § 7.001. The trial court is afforded broad discretion
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in dividing the community estate, and we must indulge every reasonable
presumption in favor of the trial court’s proper exercise of its discretion. In re
Marriage of C.A.S. & D.P.S., 405 S.W.3d 373, 384 (Tex. App.—Dallas 2013, no
pet.). The property division need not be equal, and a trial court may consider many
factors when exercising its discretion, id., including waste or fraud on the
community. Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998).
Fraud on the community can be actual or constructive. Strong v. Strong, 350
S.W.3d 759, 771 (Tex. App.—Dallas 2011, pet. denied). Constructive fraud may be
shown if one spouse unfairly deprives the other spouse of the benefit of community
property. Id. “A presumption of constructive fraud arises where one spouse disposes
of the other spouse’s interest in community property without the other spouse’s
knowledge or consent.” Id. If the presumption arises, the burden of proof then shifts
to the spouse who made the transfers to prove the fairness of the
disposition. Chatterjee v. Banerjea, No. 05-18-01035-CV, 2019 WL 3886655, at *5
(Tex. App.—Dallas Aug. 19, 2019, no pet.) (mem. op.). While waste claims are often
premised on specific transfers or gifts of community property to a third party, a waste
judgment can also be sustained by evidence of community funds unaccounted for by
the spouse in control of those funds. Wheeling v. Wheeling, 546 S.W.3d 216, 225
(Tex. App.—El Paso 2017, no pet.).
According to Wife, Husband alone had managed the family finances, and
when the couple encountered difficulties in their relationship, he acted swiftly to
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shut off Wife’s access to family accounts and hide assets from her. Wife submitted
evidence that Husband had transferred over $300,000 of community funds to himself
or his relatives between 2017 and 2019. In all, she documented seven sizeable
transfers ranging from $12,300 to $102,406.03 over that period, along with other
smaller transfers. Wife denied that she had known of or consented to any of these
transfers. She conceded that much of the money came from her joint accounts with
Husband, but she maintained that she did not discover her name was on these joint
accounts until the divorce proceedings began. There was also evidence that Husband
had power of attorney for Wife, which he exploited in secreting the funds.
Husband testified that Wife knew about and agreed to the transfers. He also
attempted to justify the transfers, explaining them as innocuous family expenses. For
instance, he testified that one of the transfers was used to renovate and furnish an
apartment for Wife and the children, while another was used to support his father in
Jordan. Two other transfers, he testified, were used to fund a family vacation and
Husband’s side business of renovating houses, both of which Wife knew of and
benefited from. More generally, Husband maintained that he was not a wasteful
person and that, at any rate, the family had too little money to permit wasteful use
of community funds.
However, the trial court expressly found that Husband’s testimony was not
credible. Furthermore, Wife claimed to be unaware of the transfers and disputed
Husband’s explanations, and the trial court found her testimony to be credible. It
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was the trial court’s sole right to assess the parties’ credibility, and we defer to these
determinations on appeal.
Because there was credible proof Husband had disposed of over $300,000 in
community property without Wife’s knowledge or consent, the evidence warranted
a presumption that Husband had committed constructive fraud. Husband offered no
credible evidence to rebut that presumption. The state of the evidence thus fully
supports the trial court’s determination that Husband constructively defrauded the
community estate. See In re D.V.D., No. 05-17-00268-CV, 2018 WL 2316014, at *7
(Tex. App.—Dallas May 22, 2018, no pet.) (mem. op.) (upholding a trial court’s
ruling on constructive fraud claim as a credibility determination in the face of
conflicting evidence); Strong, 350 S.W.3d at 771 (same).
Husband, however, would require more. He contends that to sustain a finding
of constructive fraud, there must also be evidence of fraudulent intent. As support,
he relies on our sister court’s framing of the issue when it wrote, “[w]aste occurs
when one spouse, dishonestly or purposefully with the intent to deceive, deprives the
community estate of assets to the detriment of the other spouse.” Giesler v. Giesler,
No. 03-08-00734-CV, 2010 WL 2330362, at *3 (Tex. App.—Austin June 10, 2010,
no pet.) (mem. op.) (emphasis added).
This argument is inconsistent with our precedent. “Constructive fraud does
not require a showing of fraudulent intent . . . .” Strong, 350 S.W.3d at 771; accord
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Puntarelli v. Peterson, 405 S.W.3d 131, 138 (Tex. App.—Houston [1st Dist.] 2013,
no pet.). Husband offers no reason to revisit Strong, and we decline to do so.
Husband has not shown that the trial court abused its discretion in finding
constructive fraud. Accordingly, we overrule Father’s first issue.
II. Alter Ego
In his second and third issues, Husband challenges the trial court’s
determination that he used his company, Renaissance, as his alter ego. Based on this
determination, the trial court disregarded the company’s corporate form and awarded
real property belonging to the company to Wife. Husband maintains that this was
error.
Under certain circumstances, a spouse may be able to reach the assets of the
other spouse’s separately owned corporation. Young v. Young, 168 S.W.3d 276, 281
(Tex. App.—Dallas 2005, no pet.). A finding of alter ego allows piercing of the
corporate veil. Id. Piercing the corporate veil, in turn, allows the trial court to
characterize as community property assets that would otherwise be the separate
property of a spouse. Id.In a divorce case, a finding of alter ego requires (1) unity between the separate
property corporation and the spouse such that the separateness has ceased to exist,
and (2) the spouse’s improper use of the corporation damaged the community estate
beyond that which might be remedied by a claim for reimbursement. Id. at 281–82.
The trial court must find something more than mere dominance of the corporation
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by the spouse. Lifshutz v. Lifshutz, 61 S.W.3d 511, 517 (Tex. App.—San Antonio
2001, pet. denied).
In this case, the trial court made several factual findings that corresponded
with its ultimate alter ego determination. The trial court found that there was
extensive commingling of personal and company funds. According to the findings,
Husband was the sole member and owner of Renaissance, and he treated
Renaissance’s accounts as his personal accounts. He used company funds on
personal expenditures and financial transfers to family members, but he was unable
to provide any documentation to explain the company’s finances or justify its
expenses or transfers. Based on these facts, the trial court determined that Husband
used Renaissance as his alter ego.
The record supports these findings. Renaissance’s bank statements show that
company money was regularly spent on personal purchases such as movies,
groceries, and liquor. The same statements showed that Husband often made four-
figure transfers to his brother in Jordan from company accounts, and it was
undisputed that those transfers had nothing to do with Renaissance’s business of
renovating houses. The statements show that around the time Husband filed for
divorce, he withdrew over $100,000 in community funds from the company’s
account, but he was unable to produce any credible evidence to explain where that
money had gone. The withdrawal left the company undercapitalized with just under
$19,000 in reserves available along with some property assets. The evidence
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reflected that Renaissance was a profitable enterprise in the years before the divorce,
but at the time of the divorce, Husband claimed that the business was defunct due to
lack of funding.
In Young, we upheld an alter ego finding in a divorce case based on
comparable proof. See 168 S.W.3d at 283. We emphasized the husband’s
commingling of assets, his unexplained personal expenditures with company funds,
and that his actions left “a substantial amount of money unaccounted for.” Id.; see
Boyo v. Boyo, 196 S.W.3d 409, 421 (Tex. App.—Beaumont 2006, no pet.)
(upholding alter ego finding in a divorce case based on evidence of sole control,
commingling of assets, personal expenses paid with company funds, and
“questionable transfers” of community funds to family and friends through the
company). Much like here, the record in Young also contained evidence that the
husband earned several hundred thousand dollars through the business in the years
before the divorce, but at the time of the divorce, the husband claimed that he was
not working and that the company had no income. 168 S.W.3d at 283.
This case calls for the same result as in Young. Viewing the evidence in the
light most favorable to Wife, we cannot hold that the evidence is legally insufficient
to support the trial court’s alter ego finding. See id. Accordingly, we overrule
Husband’s second and third issues.
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III. Award of Retirement Accounts without Valuation Evidence
In his fourth issue, Husband contends that the trial court abused its discretion
by awarding Wife the full value of all retirement accounts, pensions, annuities, and
annuity life insurance benefits that were in Husband’s name. Husband asserts that
there was no evidence as to the value of any such financial assets, and thus the trial
court acted arbitrarily in awarding those unknown assets to Wife.
However, Husband provided no evidence concerning the existence or value
of these assets. “[W]hen a party does not provide values for property to be divided,
that party may not complain on appeal that the trial court lacked sufficient
information to properly divide the property.” Deltuva v. Deltuva, 113 S.W.3d 882,
887 (Tex. App.—Dallas 2003, no pet.) (op. on reh’g).
Just the opposite, Husband insisted at trial that no such assets existed. During
his testimony, he was confronted with bank records showing that he had received
distributions from an undisclosed IRA account, but Husband continued to deny that
he had any IRA accounts. Based on this evidence, the trial court found that husband
failed to disclose an individual retirement account, deposits of which were evidenced
by a bank statement in his name. Further, the trial court deemed Husband’s
testimony not credible. The trial court awarded Wife a disproportionate division in
part because of what it termed Husband’s “fraudulent actions,” and one facet of that
division was awarding Wife all of Husband’s retirement accounts, pensions,
annuities, and annuity life insurance benefits, though their exact value and status was
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unknown. See Rafidi v. Rafidi, 718 S.W.2d 43, 45 (Tex. App.—Dallas 1986, no writ)
(approving similar measures where the husband’s stonewalling left “an unknown but
substantial amount” of financial assets that had not been “disclosed to the Court and
are unaccounted for”).
Because Husband provided no information concerning the existence or value
of the assets in question and instead acted to frustrate legal inquiry into these assets,
he may not complain on appeal concerning deficiencies in their valuation and
division. We overrule Husband’s fourth issue.
CONCLUSION
Husband asserted that no evidence supports the findings that he committed
constructive fraud or used his company as an alter ego. The evidence supported these
determinations. Husband protested the valuation and division of certain financial
assets, but he may not complain about those decisions given that he provided no
information to address their valuation and worked to thwart their division.
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Accordingly, we affirm the trial court’s judgment.
/Robbie Partida-Kipness/
ROBBIE PARTIDA-KIPNESS
JUSTICE
200787F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
IN THE INTEREST OF M.H.A, On Appeal from the 296th Judicial
AND Z.H.A., CHILDREN District Court, Collin County, Texas
Trial Court Cause No. 296-53533-
No. 05-20-00787-CV 2018.
Opinion delivered by Justice Partida-
Kipness. Justices Reichek and
Goldstein participating.
In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.
It is ORDERED that appellee Mervant Abufaris recover her costs of this
appeal from appellant Husny Amerih.
Judgment entered this 7th day of July, 2022.
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