Garza v. Garza

• Citation: 217 S.W.3d 538
• Decision Date: 11 October 2006
• Docket Number: No. 04-03-00888-CV.,04-03-00888-CV.
• Parties: Stephanie M. GARZA, Appellant, v. Xavier H. GARZA, Appellee.
• Court: Texas Court of Appeals

217 S.W.3d 538

Stephanie M. GARZA, Appellant, v. Xavier H. GARZA, Appellee.

No. 04-03-00888-CV.

Court of Appeals of Texas, San Antonio.

October 11, 2006.

Rehearing Overruled December 4, 2006.

James E. Hoffman, Per A. Hardy, Law Office of Per A. Hardy, San Antonio, for appellant.

Beth Watkins Squires, Law Office of Beth Squires, Michael W. Jackson, Law Office of Michael W. Jackson, Jo Chris G. Lopez, Shaddox, Compere, Walraven & Goode, P.C., San Antonio, for appellee.

Wade B. Shelton, Shelton & Valadez, P.C., San Antonio, for other.

Sitting: SARAH B. DUNCAN, Justice, KAREN ANGELINI, Justice, PHYLIS J. SPEEDLIN, Justice.

OPINION

Opinion by KAREN ANGELINI, Justice.

Stephanie Garza appeals the final decree of divorce and brings the following issues on appeal: (1) whether the trial court awarded a disproportionate division of the property to Xavier Garza by improperly characterizing community assets as Xavier Garza's separate property; (2) whether the trial court disregarded the commingling of community and separate property; (3) whether the trial court should have applied the doctrines of judicial admission and judicial estoppel with respect to Xavier Garza's testimony; (4) whether the trial court should have "disregarded the corporate fiction of Hacienda Tile, Inc."; (5) whether the trial court applied the incorrect burden of proof regarding community and separate property and ignored the presumption that all property acquired during the marriage is community; (6) whether the trial court should have denied Stephanie Garza's claims based on fraud, breach of fiduciary duty, and reimbursement; (7) whether the trial court ordered periods of possession and the rights and duties of the parties based on Xavier Garza's request instead of the best interest of the children; (8) whether the trial court erred in admitting Stephanie Garza's medical records in evidence; (9) whether the trial court erred in allowing Xavier Garza to play an audiotape recording to the jury while excluding Stephanie Garza's audiotape; (10) whether the trial court erred in failing to ensure that a complete reporter's record was made; and (11) whether the trial court erred in admitting in evidence Xavier's testimony about documents not produced in discovery. We affirm in part and reverse and remand in part.

BACKGROUND

Xavier and Stephanie Garza were married on March 9, 1996. Their first son was born in 1997, and their second son was born in 1999. Both children have various medical conditions requiring special attention. Before the marriage, Stephanie Garza was employed as a teacher, but soon after the wedding and the birth of her and Xavier's first son, she stayed at home to take care of the children.

Throughout their marriage, Xavier Garza was the primary financial provider for the family. A year before the wedding, in 1995, he created a corporation called Hacienda Tile, Inc. He created Hacienda Tile, Inc., a subcontracting company, for the purpose of installing ceramic and stone tiles. Xavier Garza and his father were the only members of the board of directors, and Xavier was the sole shareholder. In 1998, after the wedding, Xavier Garza expanded his business and began to purchase land and construct custom homes under the name "Hacienda Homes."

On January 25, 2002, Xavier Garza filed for divorce. During their separation, both Xavier and Stephanie spent an equal amount of time with the children. However, on August 20, 2003, in the final divorce decree, although Xavier and Stephanie were appointed joint managing conservators, Xavier Garza was awarded the exclusive right to determine the children's primary residence, the exclusive right to consent to their medical treatment, and the exclusive right to make decisions about their education. Xavier Garza was given a superior right to possess the children. Stephanie Garza was awarded possession of the children pursuant to a possession order that deviated from the standard possession order, and she was ordered to provide health insurance for the children and to pay $232.00 per month in child support.

With regard to the division of property, the trial court found that the parties had $147,742.00 in equity in their community homestead. The trial court awarded the homestead to Xavier Garza and ordered him to pay Stephanie the principle sum of $73,871.00 plus annual interest of 6% in 60 monthly payments of $1,428.13. The court determined that Hacienda Tile, Inc. a/k/a Hacienda Homes and all assets, property, and accounts related to or used in connection with this business were Xavier Garza's separate property. The court also determined that several shares of stock, jewelry, and various household items were Stephanie's separate property.

REIMBURSEMENT CLAIMS

According to Stephanie Garza, the trial court abused its discretion in denying her reimbursement claims regarding the following: (1) Xavier Garza's house in Austin; (2) Xavier's 1972 Oldsmobile Cutlass; and (3) legal fees paid by Xavier relating to his daughter from his previous marriage.

"The rule of reimbursement is purely an equitable one." Vallone v. Vallone, 644 S.W.2d 455, 458 (Tex.1982). A right of reimbursement arises when the funds or assets of one estate are used to benefit and enhance another estate without itself receiving some benefit. Id. at 459. A right of reimbursement also arises when community time, talent, and labor are used "to benefit and enhance a spouse's separate estate, beyond whatever care, attention, and expenditure are necessary for the proper maintenance and preservation of the separate estate, without the community receiving adequate compensation." Id.

A party claiming the right of reimbursement must plead and prove that the expenditures and improvements were made and that they are reimbursable. Id.; Hailey v. Hailey, 176 S.W.3d 374, 384 (Tex.App.-Houston [1st Dist.] 2004, no pet.). "Whether the situation involves the payment of a purchase money debt or a capital improvement, the enhancement value is the measure of reimbursement." Zeptner v. Zeptner, 111 S.W.3d 727, 735 (Tex.App.-Fort Worth 2003, no pet.) (citing Penick v. Penick, 783 S.W.2d 194, 197 (Tex.1988)). The enhanced value of separate property is the difference between the fair market value before and after any improvements made by the community during the marriage. Rogers v. Rogers, 754 S.W.2d 236, 239 (Tex.App.-Houston [1st Dist.] 1988, no writ); see also Anderson v. Gilliland, 684 S.W.2d 673, 675 (Tex.1985).

Reimbursement is not available as a matter of law, but lies within the discretion of the court. Vallone, 644 S.W.2d at 459; Zeptner, 111 S.W.3d at 735. In evaluating the merits of a claim for reimbursement, the trial court should consider "all the facts and circumstances and determine what is fair, just, and equitable." Penick v. Penick, 783 S.W.2d 194, 197 (Tex.1988); see also Zeptner, 111 S.W.3d at 735. The trial court should not simply return to the spouse seeking reimbursement the actual amount advanced to the other spouse's separate estate without regard to the benefits received in turn by the community estate. Penick, 783 S.W.2d at 197-98; Zeptner, 111 S.W.3d at 735. An "equitable claim for reimbursement is not merely a balancing of the ledgers between the marital estates." Penick, 783 S.W.2d at 198.

A. The Austin House

According to Stephanie Garza, she is entitled to reimbursement for the increased value during the marriage of Xavier Garza's rental house in Austin "in the amount of $135,000.00 and reimbursement for the value of the time, toil and effort expended by the community estate on the property." Stephanie complains that Xavier would go once a month to check up on the house and make repairs to the house, including painting the house, installing new tile floors, and repairing the water heater and plumbing. However, as mentioned above, the community is only entitled to reimbursement when the community's time, talent, and labor are used to benefit and enhance a separate estate beyond whatever care, attention, and expenditure are necessary for the proper maintenance and preservation of the separate estate. Vallone, 644 S.W.2d at 459. Here, the trial court was within its discretion in finding that Xavier's time, talent, and labor were reasonably necessary in maintaining and preserving the Austin rental property.

Stephanie also emphasizes that Xavier had repairs made to the foundation totaling approximately $2,000.00. However, no evidence was offered to show that this repair was a capital improvement to the house. See Bell v. Bell, No. 12-04-00244-CV, 2005 WL 1538275, at *7 (Tex. App.-Tyler June 30, 2005, no pet.) (memo. op.) (holding that husband was not entitled to reimbursement because there was no evidence that repairing septic system to house owned by wife separately was a capital improvement to the septic system or the home). And, even if we assume that the repairs were a capital improvement, the appropriate measure of reimbursement would be the enhanced value of Xavier's house as a result of those expenditures. See id. However, the only evidence in the record regarding the value of Xavier's house was his testimony that, to the best of his knowledge without doing an appraisal, the house was worth $270,000.00. There was no evidence about the fair market value of the home before the repairs were made. Accordingly, we hold that the trial court, in failing to award Stephanie's reimbursement claim regarding Xavier's house in Austin, did not abuse its discretion. See Zeptner, 111 S.W.3d at 737 (holding that trial court did not abuse its discretion by refusing to award reimbursement to the community for improvements to property when no evidence was offered to prove the value of the property before improvements); see also Bell, 2005 WL 1538275, at *7.

B. 1972 Oldsmobile Cutlass

Stephanie also claims entitlement to reimbursement for the enhanced value and the community funds expended to restore Xavier's 1972 Oldsmobile Cutlass....