Horlock v. Horlock, 1158

• Decision Date: 31 December 1975
• Docket Number: No. 1158,1158
• Citation: 533 S.W.2d 52
• Parties: Dorothy Gray HORLOCK, Appellant, v. Roy M. HORLOCK, Appellee. (14th Dist.)
• Court: Texas Court of Appeals

Page 52

533 S.W.2d 52

Dorothy Gray HORLOCK, Appellant, v. Roy M. HORLOCK, Appellee.

No. 1158.

Court of Civil Appeals of Texas Houston (14th Dist.).

Dec. 31, 1975.

Rehearing Denied Feb. 25, 1976.

Robert J. Piro, Baker & Botts, Eugene L. Smith, Houston, for appellant.

Bryan W. Scott, Michael D. Stewart, Urban, Coolidge, Pennington & Scott, Houston, for appellee.

COULSON, Justice.

This is an appeal from a final decree of divorce. The principal issue is whether the court's property division is just and right.

Dorothy Gray Horlock, appellant, thirty-five years of age, and Roy M. Horlock, appellee, forty-one years of age, were married on November 22, 1966. Dorothy Gray Horlock had not been previously married. Roy M. Horlock was married to Margaret Boudreaux Horlock until her death on August 1, 1965. She bequeathed her entire estate to Roy M. Horlock. Three daughters were born to Margaret Boudreaux Horlock and Roy M. Horlock. One child, a son, was born to Dorothy Gray Horlock and Roy M. Horlock.

The parties separated on or about July 1, 1973. A final decree granting the appellant a divorce was entered on January 6, 1975. Custody of the son was granted to appellant. Appellee was ordered to pay child support of $750 per month, to pay for his son's medical hospitalization, to pay his son's medical and dental expenses in excess of $100 per year, to pay all of his son's orthodontic expenses, and to pay his son's private school tuition. Appellee was granted visitation rights with his son at specified times.

The divorce decree ordered a division of the Horlocks' estate and established responsibility for the discharge of debts and liabilities. The appellant's attorney was awarded a judgment against appellee of $15,000 for legal services rendered on appellant's behalf. All costs were adjudged against the appellee. Dorothy Horlock has brought this appeal.

Appellant's points of error concern four major issues. First, the appellant contends that certain gifts made during their marriage by Roy M. Horlock to his three daughters constituted fraud on the appellant's community estate. Second, the appellant challenges the trial court's determination that the separate estate of the appellee was entitled to reimbursement from the community estate for the proceeds from the sale of property owned by appellee prior to the date of the marriage (these proceeds having become totally comingled with the community estate of the parties). Third, the appellant contends that the trial court abused its discretion in the division of the parties' property because the division was not fair and equitable. Fourth, the appellant contends that the trial court erroneously determined that certain shares of capital stock in Collegiate Services Corporation were a part of the community property of the parties; her argument being that the stock was his separate property.

THE GIFTS TO THE CHILDREN

During the marriage, the appellee made gifts to his mother, who was blind and confined to a nursing home. He also made gifts to his three daughters and to his son. On appeal, the appellant has challenged only the gifts to the three daughters as being a fraud on her rights. The gifts ranged in value from $3,000 to $6,000 per year plus an amount equal to the lifetime federal gift tax exclusion for both the appellee and the appellant. The total value of the gifts to the three daughters was $131,517.

Appellant's contention that community property was used in making the gifts is not challenged by appellee. He did not tell the appellant that he was making the gifts to his three daughters, and admitted that the appellant would have strenuously protested had she known of the gifts. In 1972, appellee filed a gift tax return on which the appellant's name appeared. A third party signed the appellant's name to the return at the request of the appellee, who acted without the knowledge and consent of the appellant. The appellee and his accountant testified that the resulting income tax advantage generated by the gifts to his children was the motivation for the gifts. The appellee testified that in making the gifts he intended no deprivation of the appellant's rights. The trial court found that the appellee had not perpetrated an actual or constructive fraud upon the appellant by making the gifts to his three daughters.

To sustain a cause of action for actual fraud, the appellant has the burden of showing that the gifts were made with the primary purpose of depriving her from having the use and enjoyment of the assets comprising the gifts. Actual fraud involves dishonesty of purpose or intent to deceive. Land v. Marshall, 426 S.W.2d 841, 846 (Tex.Sup.1968); Archer v. Griffith, 390 S.W.2d 735, 740 (Tex.Sup.1964). Here, the appellant has failed to sustain her burden of showing an actual fraud. The evidence in support of appellant's position is conflicting. The appellee admitted that he made the gifts knowing that the appellant would not approve of them, however, there is ample evidence that the appellee's intention in making the gifts was to benefit both the community estate and the parties' individual estates upon the death of each or both of them.

The trial court found that at the time of the marriage, appellee owned property having a net value of approximately $1,000,000. Most, if not all of the community estate, would be classified as the special community of the husband under Texas Family Code Annotated, § 5.22. There may be a fraud on a spouse's community interest where the special community property of the other spouse is involved. However, the fact that it is a spouse's special community is important in considering the rights of disposition which accrue to that spouse given the special nature of that community property. It is not necessary that one spouse approve or agree with the dispositions made by the other spouse of that other spouse's special community property. Murphy v. Metropolitan Life Insurance Company, 498 S.W.2d 278 (Tex.Civ.App.--Houston (14th Dist.) 1973, writ ref'd n.r.e.). The single fact that the appellee intentionally prevented the appellant from finding out about the gifts which he made to his daughters does not constitute actual fraud.

In the instance of constructive fraud, a gift of one spouse's share of the community property will be set aside where the gift is unfair to that spouse. It was the appellee's burden to prove that the gifts were fair. Murphy v. Metropolitan Life Ins. Co., supra; Givens v. Girard Life Insurance Company of America, 480 S.W.2d 421 (Tex.Civ.App.--Dallas 1972, writ ref'd n.r.e.).

In considering the wife's claim of a constructive fraud against her share of the community property the courts have considered three primary factors. Those factors are the size of the gift in relation to the total size of the community estate, the adequacy of the estate remaining to support the wife in spite of the gift, and the relationship of the donor to the donee. Givens v. Girard Life Insurance Company of America, supra; Hartman v. Crain, 398 S.W.2d 387 (Tex.Civ.App.--Houston 1966, no writ).

Significant to the disposition of the issue of constructive fraud in this case are the findings of fact filed by the trial court. Among other things, the trial court found that Roy M. Horlock had three daughters by his prior marriage. At the time of the parties' separation the girls' ages were fourteen, seventeen and eighteen. The daughters inherited nothing from their deceased mother, whose will named Roy M. Horlock as her sole beneficiary of her substantial estate. The trial court further found that during their marriage, Dorothy Gray Horlock and Roy M. Horlock quarreled over Dorothy Gray Horlock's demands that Roy M. Horlock's daughters not share with her in his properties. She also demanded an interest in the properties owned by Roy M. Horlock prior to the marriage.

Roy M. Horlock's daughters are the natural objects of his bounty. The total value of the gifts to the daughters was $131,517. The trial court found as a fact that the appellee at the time of the marriage owned properties having a net value of approximately $1,000,000, and that at the time of the dissolution of the marriage appellant and appellee owned properties having a net value of approximately $3,000,000 to $4,000,000. It is evident that throughout the marriage the value of the estate was in excess of $1,000,000. Assuming the lower value of $1,000,000, the appellee's gifts to his three daughters constituted no more than 13.1517% Of the total estate. The remaining minimum figure of approximately $870,000 in community funds would be sufficient to provide for the needs of the wife. The foregoing facts and considerations coupled with the tax advantages sought by the appellee removes the gifts by the appellee to his daughters from the pale of a constructive fraud upon the wife's portion of the community estate.

The appellant's first four points of error are overruled.

THE RIGHT OF THE HUSBAND'S SEPARATE ESTATE TO REIMBURSEMENT

FROM THE COMMUNITY ESTATE

Appellant's points of error eight through eleven challenge the trial court's conclusions of law that the appellee is entitled to reimbursement for the use of his separate funds to enhance, improve, and increase the value of the community estate. The trial court concluded as a matter of law that regardless of appellee's equitable right of reimbursement, the property division made in the judgment is fair and equitable.

As a part of the findings of fact, the trial court found that at the time of the marriage the appellee owned properties having a net value of approximately $1,000,000. Subsequent to the marriage the appellee sold separate property real estate for approximately $700,000. The appellee also received payments in excess of $200,000 under certain contracts which had been entered into prior to the marriage and which the appellee had already performed. The total value of the separate property sold and collected...