McClary v. Thompson

• Decision Date: 17 January 2002
• Docket Number: No. 2-01-129-CV.,2-01-129-CV.
• Citation: 65 S.W.3d 829
• Parties: Jennifer Lynne McCLARY f/k/a Jennifer Lynne Thompson, Appellant, v. Darrell Ray THOMPSON, Appellee.
• Court: Texas Court of Appeals

65 S.W.3d 829

Jennifer Lynne McCLARY f/k/a Jennifer Lynne Thompson, Appellant, v. Darrell Ray THOMPSON, Appellee.

No. 2-01-129-CV.

Court of Appeals of Texas, Fort Worth.

January 17, 2002.

David R. Sweat, Arlington, for Appellant.

Alley, Goza, Mullen & Minick, Richard Alley, Fort Worth, Travis E. Alley, Granbury, for Appellee.

Panel A: CAYCE, C.J.; LIVINGSTON and GARDNER, JJ.

OPINION

ANNE GARDNER, Justice.

INTRODUCTION

This is an appeal from a judgment granting a divorce and dividing the parties' community estate, following a trial to the court. In four issues, Appellant, Jennifer Lynne McClary, f/k/a Jennifer Lynne Thompson (McClary), complains of the trial court's characterization of funds contained in her ex-husband's retirement plan account at the time of the divorce and acquired during the marriage as his separate property.

ISSUES

Conceding that the initial contributions to the retirement plan made before the marriage are the separate property of her ex-husband, Appellee Darrell Ray Thompson (Thompson), McClary contends by her first issue that the trial court erred in failing to characterize the contributions made to the plan during the marriage and the interest earned on those contributions as community property. By her second issue, McClary asserts that the parties' premarital agreement did not address contributions to be made during the marriage and, therefore, did not convert community contributions to the plan to separate property. Thirdly, and alternatively, McClary argues that the premarital agreement is void and therefore unenforceable. In her fourth issue, McClary asserts that the trial court erred in admitting parol evidence about whether the parties intended the premarital agreement to cover future contributions to the retirement plan.

We hold that the contributions and interest earned during the marriage were community property and that the premarital agreement did not convert the character of those contributions into separate property. We affirm that portion of the trial court's judgment granting a divorce to the parties and dividing the parties' estate in accordance with their agreement. We reverse that portion of the judgment holding the entirety of the retirement plan to be Thompson's separate property and remand to the trial court as to the division of the Texas District and County Retirement System Plan.

FACTUAL AND PROCEDURAL HISTORY

The relevant facts are undisputed. McClary and Thompson were married on October 11, 1985. At the time of their marriage, Thompson had been employed for approximately five and one-half years by Tarrant County as a medical investigator in the Medical Examiner's Office. As an employee of Tarrant County, Thompson participated in the Texas County and District Retirement System Plan during his employment. At the time of the marriage, the balance in Thompson's account in the retirement plan was $11,962.28. The retirement plan was a "defined contribution plan" to which both Tarrant County and Thompson regularly made contributions.

Before their marriage, McClary and Thompson entered into an "Agreement in Contemplation of Marriage" (the premarital agreement) with the stated desire "to partition and divide their separate property so that, as [therein] provided, each party shall become the separate owner of such properties in the event of dissolution of the contemplated marriage." The agreement, drafted by the husband's attorney, provided that four assets owned by McClary and Thompson at the time of the marriage would remain the separate property of each as long as that property was not sold or liquidated prior to the dissolution of the marriage; however, if the property was sold during marriage the proceeds would become community property.

Specifically, the agreement addressed Thompson's equity in real property in Benbrook, Texas, a 1977 Marquis boat owned by Thompson, a certificate of deposit (CD) owned by McClary, and Thompson's proceeds in the retirement plan. During the marriage the parties disposed of the real property, the boat and the certificate of deposit. When Thompson filed for divorce in 1999, the only remaining asset addressed in the premarital agreement was Thompson's account in the retirement plan.

At the time of divorce, the balance in the retirement plan account was $116,754.39. Before trial, the parties agreed upon the division of all assets and liabilities of the marital estate except that portion of the retirement plan account acquired during the marriage, which totaled $104,771.72. As to that portion of the account, the parties stipulated that each was to be awarded 50% of that portion of the retirement plan found by the trial court to be community property. Pursuant to the parties' agreement, trial was limited to the issue of what portion of the retirement plan account was Thompson's separate property and what portion was community property, including construction of the premarital agreement as to its effect, if any, on the nature of that interest. The trial court awarded the entirety of the retirement account, including that portion acquired during the marriage, to Thompson as his separate property.¹

DISCUSSION

In McClary's first issue, she contends that the portion of the retirement plan acquired during the marriage was community property. Specifically, McClary argues that Thompson's retirement plan was a defined contribution plan and, as a matter of law, all contributions made and interest earned in the account during the fifteen-year marriage were community property. Thompson responds, arguing that the "inception-of-title" doctrine applies to the retirement plan. Because his premarital contributions were separate property, he urges that the entire retirement plan account, including contributions made during the marriage and interest earned on those contributions, constituted his separate property. Further, Thompson contends that McClary failed to object to the findings of fact and conclusions of law and, accordingly, the findings of fact and conclusions of law are presumptively correct.

Initially, we reject Thompson's contention that McClary failed to preserve error by failing to complain of the findings of fact and conclusions of law. McClary properly preserved error with her timely motion for new trial, which was denied by written order, complaining of the incorrect characterization of the entire amount of the retirement plan as Thompson's separate property. We also agree with McClary that the contributions to and interest earned in the retirement plan during the marriage were community property.

The Texas Family Code requires the trial court to order a "just and right" division of the parties' estates in a divorce proceeding. TEX. FAM.CODE ANN. § 7.001 (Vernon 1998); Lipsey v. Lipsey, 983 S.W.2d 345, 350 (Tex.App.-Fort Worth 1998, no pet.). The trial court has wide discretion in the division of marital property, and we will not disturb its decision unless the trial court has clearly abused its discretion. Jacobs v. Jacobs, 687 S.W.2d 731, 733 (Tex.1985); Lipsey, 983 S.W.2d at 350. However, the mischaracterization of a major asset of the estate of the parties is reversible error affecting the just and right division of the community estate. Jacobs, 687 S.W.2d at 733; In re Marriage of Joiner, 755 S.W.2d 496, 499 (Tex.App.-Amarillo 1988, no writ).

The family code further requires that a decree of divorce must determine the rights of both parties to the marriage in a pension plan, retirement plan, annuity, individual retirement account, or other form of savings, profit sharing, or financial plan as to an employee. TEX. FAM.CODE ANN. § 7.003 (Vernon 1998). Moreover, despite its wide discretion, a trial court must apportion retirement benefits in accordance with the value of the community interest in the benefits at the time of the divorce. Baw v. Baw, 949 S.W.2d 764, 767 (Tex.App.-Dallas 1997, no writ).

I. The Defined Contribution Retirement Plan

The Texas Constitution defines separate property as a spouse's real or personal property owned before marriage or acquired during marriage by gift, devise or descent. TEX. CONST. art. XVI, § 15. Community property consists of property other than separate property that is acquired by either spouse during the marriage. TEX. FAM.CODE ANN. § 3.002 (Vernon 1998); Lipsey, 983 S.W.2d at 350. However, when separate property produces income, and that income is acquired by a spouse during marriage, it is community property. Lipsey, 983 S.W.2d at 350. A fundamental tenet of the community property system is that whatever is acquired during marriage by the talent, toil, or other measure of productivity of either spouse is community property. Winger v. Pianka, 831 S.W.2d 853, 857 (Tex.App.-Austin 1992, writ denied). Thus, any spouse's personal income is community property. Id.; Maben v. Maben, 574 S.W.2d 229, 232 (Tex.Civ.App.-Fort Worth 1978, no writ).

"Generally, whether property is separate or community is determined by its character at inception." Barnett v. Barnett, 2000 WL 33651828, at *3, ___ S.W.3d ___, ___ (Tex.2001). Most forms of property, including real estate, life insurance policies, and stock options, have been characterized as community or separate based upon their character at inception. See id. (holding term life insurance policy acquired during marriage with premiums paid from community funds constituted community property); Charriere v. Charriere, 7 S.W.3d 217, 221 (Tex.App.-Dallas 1999, no pet.) (holding stock option acquired during marriage was community property); Roach v. Roach, 672 S.W.2d 524, 530-31 (Tex.App.-Amarillo 1984, no writ) (holding character of real property as community or separate was determined by inception-of-title rule). Inception occurs when a party first has a right of claim to the property, i.e., when title is finally vested. Smith v. Smith, 22 S.W.3d 140, 145 (Tex.App.-Houston [14th Dist.] 2000, no pet.); Winkle v. Winkle, 951 S.W.2d 80, 88 (...