Cortez v. Chapa
| Decision Date | 14 January 2021 |
| Docket Number | NUMBER 13-19-00193-CV |
| Parties | EDNA CORTEZ F/K/A EDNA CHAPA, Appellant, v. DAVID CHAPA, Appellee. |
| Court | Texas Court of Appeals |
On appeal from the 444th District Court of Cameron County, Texas.
Before Justices Benavides, Longoria, and Tijerina
This appeal arises from a post-divorce proceeding to enforce the division of property. Appellant Edna Cortez f/k/a Edna Chapa contends the trial court abused its discretion in denying her motion to enforce because: (1) the evidence was factually and legally insufficient to show that Edna and appellee David Chapa were jointly and severally liable for $3.3 million in federal tax liabilities; (2) the trial court misinterpreted the decree's division of tax liabilities; (3) the trial court impermissibly altered the division of property; and (4) the trial court awarded David additional affirmative relief not requested in his pleading. Because we agree the trial court misinterpreted the decree, we reverse and remand.
Edna and David were divorced in December 2009. The trial court awarded David the primary asset of the marital estate, Chapita's Restaurant, as his sole and separate property. However, David was required to pay Edna $928,408 for her 50% interest in the restaurant. The decree included a payment schedule that required David to make an initial payment of $50,000, monthly payments of $7,065 for seven years, and a final balloon payment of $547,916.
David made the initial payment and monthly payments in accordance with the decree for a total of $643,460, but he did not make the final balloon payment of $547,916 when it became due.1 Edna filed a suit to enforce the property division, seeking a money judgment for the balance owed. During the pendency of the case, David continued to make monthly payments in the amount of $10,000 from January 2017 until September 2017, bringing his total payments up to $733,460.
In response to the enforcement action, David acknowledged his unsatisfied obligation to Edna under the decree but filed a "crossclaim" asking the trial court to award him "credit" for half of any amount he has paid to the Internal Revenue Service (IRS) on behalf of the parties. According to David, approximately six months after the divorce, the IRS audited the business and determined that Edna and David were jointly and severally liable for federal taxes in the total amount of $3.3 million for the years 2007, 2008, and 2009.
The parties dispute the significance of the following provisions in the decree:
Both parties testified during the final hearing on March 6, 2019. David testified that approximately six months after the divorce, the IRS audited the restaurant for the years 2007 through 2009 and ultimately determined that he and Edna jointly owed approximately $3 million in federal income taxes and approximately $300,000 in "employee back tax." David estimated that he had already paid the IRS approximately $650,000 in the form of cash payments, and the IRS seized property worth $250,000:
He further testified that all his properties, including the restaurant, are encumbered by IRS liens. According to David,
Edna acknowledged that she received correspondence from the IRS stating that she and David were jointly liable for approximately $1.6 million in taxes for the years 2007 and 2008. When asked whether she was liable for the 2007 and 2008 taxes, Edna responded, "Yes." She agreed that she was unaware of those liabilities at the time of the divorce. She also acknowledged that she had hired someone to represent her concerning her tax liabilities and that she had not paid any amount toward the $1.6 million owed from 2007 and 2008. Edna had no knowledge of whether the IRS considered her jointly liable for 2009, saying she was only aware of the 2007 and 2008 tax liabilities.
During closing arguments, David's counsel asked the trial court to credit half the payments his client made to the IRS towards his unpaid obligation under the decree. Edna's counsel responded that David may be entitled to a 50% contribution for his IRS payments, but he did not believe the trial court could address any such relief in this proceeding:
The trial court asked Edna's counsel whether he was inviting David to sue his client in a separate proceeding, and he responded, "Go ahead." When the court asked why that would be advisable for his client, he explained, "Well, because it is the only form in which they can do it." He added, "they cannot raise this in this Chapter 9 proceeding."
Five days later, David filed a combined "Motion to Enforce Property Divisions and/or for Reimbursement to the Separate Estate of David Chapa for Payment of Community Property Debt and/or Motion to Divide Debt of the Community Property and/or Motion for Clarification." In the motion to enforce portion, he argued that the decree divided equally all tax liabilities for the years prior to 2009, and he requested "that he be awarded and/or given credit in an amount of 1/2 of any amounts that he has paid toward the IRS lien/assessment against both parties for taxes on the restaurant prior to 2009 toward the $547,916 and for credit in the amount of 1/2 of any future payments made to the IRS in this regard."
Alternatively, in his motion for a division of undivided assets/liabilities, he argued that the decree did not dispose of the unknown tax liabilities for 2007 and 2008, and he asked the court to "divide this debt in a just and equitable manner, pursuant to Tex. Fam. Code section 9.203." Pleading further in the alternative, David also alleged that Edna "has been unjustly enriched by the payments made by David Chapa to the IRS."
On March 29, 2019, the trial court signed an "Order on Motion for Enforcement of Property Division." Based on a finding that David had paid $980,000 from his separate estate toward Edna and David's joint federal tax liabilities, the court awarded David a $499,000 "credit" toward the $546,916 he owed Edna. The trial court further ordered the $48,916 balance withheld from Edna and that David "shall be given credit against that balance for 1/2 of any future payments." Finally, after the balance is satisfied, the courtordered Edna to reimburse David for half of all future payments he makes to the IRS "for taxes on the restaurant known as Chapita's for all years during the marriage."
Upon Edna's request, the trial court entered, among others, the following findings of fact and conclusions of law:
Findings of Fact
Conclusions of Law
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