Pearson v. Pearson, 03-13-00802-CV
| Decision Date | 15 January 2016 |
| Docket Number | NO. 03-13-00802-CV,03-13-00802-CV |
| Parties | Byron David Pearson, Appellant v. Heather Pearson, Appellee |
| Court | Texas Court of Appeals |
NO. D-1-FM-11-003060, HONORABLE AMY CLARK MEACHUM, JUDGE PRESIDING
This is an appeal from a divorce decree. Byron David Pearson (known as Snap Pearson) and Heather Hudson Pearson were married in 2000 and filed for divorce in 2011. Two children were born during the marriage. The parties submitted three disputed issues to the trial court: the characterization and value of a business interest, rules governing their children's air travel, and the enforceability of their post-nuptial agreement. The trial court characterized the business interest as community property and issued orders concerning the children's private air travel. Mr. Pearson appeals those rulings.1 The trial court also found that the marital property agreement was unenforceable, but he does not challenge that decision. The parties did not request findings of fact or conclusions of law, and none were filed. To decide Mr. Pearson's complaints, wemust do a thorough search of the lengthy record to determine whether the evidence supports the trial court's rulings. We will affirm.
During marriage, Mr. Pearson acquired an interest in a business owned by Mrs. Pearson's family, which he claimed as his separate property. Mrs. Pearson asserted that it was community property. They dispute who had the burden of proof on characterization and whether that burden was met. The trial court found the business interest to be community property, awarded it to Mr. Pearson, and awarded Mrs. Pearson offsetting property under a 52%-48% split in her favor.
Mr. Pearson contends that, because the business interest was transferred to him from his mother-in-law and his wife, it was presumed to be a gift to him. He further contends that, once he raised the presumption of gift, the burden shifted to Mrs. Pearson to disprove their intent to make him a gift. In his third issue, he argues that the trial court erred by placing the burden on him to prove the donors intended to make him a gift. In his fourth issue, he argues that the evidence is legally and factually insufficient to prove by clear-and-convincing evidence that the transfer of the business interest to him was not a gift.
BACKGROUND
Joe McQueen, Mrs. Pearson's maternal grandfather, started a manufacturing business in the 1950s called IEC Corporation. It designs and assembles slip rings, an electromechanical connecting device that allows transmission of power and electrical signals from a stationary to a rotating structure. The business was incorporated and issued 100 shares of stock.
Mr. McQueen died before the Pearsons married, and his forty-seven shares of stock were held by the J.B. McQueen Marital Trust. Mrs. Pearson's grandmother Beatrice McQueenowned five shares, Mrs. Pearson's mother Diana Hudson and her father John Paul Hudson each owned twenty-one shares, and Mrs. Pearson and her brother Casey Hudson each owned three shares. All the family, including Mrs. Pearson, had worked in the business over the years.
As attorney Bill Leighton testified, many small family-owned businesses handle their business affairs and record-keeping informally, without following proper formalities in carrying out their business activities. IEC was no exception. Mrs. McQueen, for example, still drew a substantial salary, although she no longer worked in the business. The Hudsons explained that she owned the company. The stock log was handwritten and not always up to date.
Mr. Hudson was managing the company, but by late 2003 and 2004 it was struggling and in debt. IEC was unable to pay federal payroll taxes, and the Hudsons had to guarantee a personal line of credit to make payroll and cover expenses.
Mr. Pearson was a computer programmer with a background in designing custom programs. He was working for Casa Mechanical Services, a plumbing and air conditioning contractor, earning $250,000 per year. He designed a computer program that the company used and marketed to other companies and would receive 50% of the proceeds from the sale of the program so long as he worked for Casa. Before the marriage, he wrote an automation program for IEC and updated and networked the company's computer systems, so he had some familiarity with the business.
Mr. Pearson testified that Mrs. Pearson was worried about her parents and began to encourage him to go to work at IEC to help them. In deciding whether to do so, Mr. Pearson's testimony reflects that he was primarily concerned with protecting his own self-interest. Even before discussing the possibility with the Hudsons, he personally researched Texas property laws andeducated himself on the definitions of separate property and community property. He obtained a legal understanding of the meaning and significance of separate property, including the concept that property acquired during marriage by gift is separate property. He wanted to ensure that any business interest he acquired would be his separate property, not community property. He understood that generally the income from separate property is community property, and he researched how to change the income into his separate property so that it would not be community property with Mrs. Pearson. He discussed the issues with what he described as "lots of lawyer friends" and "lots of friends who had divorced." He did not recall whether he related any of this information to anyone. Mrs. Pearson and her parents did not indicate an understanding of these concepts at the time.
Mr. Pearson testified that he told Mrs. Pearson that he would only go to work at IEC if 50% of the stock was his separate property and the income therefrom was his separate property. He understood the meaning of separate property and wanted to protect himself from being "kicked out" in case of family turmoil or divorce. He does not know whether he explained his research findings or the significance of separate and community property to Mrs. Pearson or to the Hudsons. He does not know whether he ever explained to the Hudsons that if they gave stock to him, Mrs. Pearson would own no financial interest in IEC. He stated that he and Mrs. Pearson discussed his terms and agreed in advance that all would be his separate property. Mrs. Pearson wanted him to feel secure about his place in the family business, but she denied this agreement.
Mr. Pearson testified that he met with Mr. and Mrs. Hudson in June 2004 and agreed to go to work at IEC on the conditions that (1) the Hudsons give him fifty shares of stock as his separate property and (2) he would have full authority to make changes he thought necessary to turn the business around. The Hudsons did not yet own fifty shares but agreed to transfer stock tohim sometime in the future after Mrs. McQueen died and Mrs. Hudson inherited. The Hudsons and Mr. Pearson wrote their agreement on a legal pad and signed it. Mr. Pearson made a copy and put it in his file drawer at home. He testified that the agreement stated that the Hudsons would gift him fifty shares of stock.
The Hudsons testified that they signed an agreement with Mr. Pearson that he would have control of the business and that they would transfer fifty shares of stock to him if he came to work at IEC and was able to turn the business around. Mr. Hudson testified that they agreed to pay him with their stock to do this service for them. There was no reason they would give the stock to Mr. Pearson and cut out their daughter from her grandfather's business. Mrs. Hudson testified that there was never any discussion with Mr. Pearson about a gift, and they never discussed with him that the shares would be his separate property. She testified that there was no discussion of gift or separate property at the time of the agreement or when she "wrote his shares out" when they were transferred to him at the end of 2005. She testified that they never had any intention to make him a gift; their intention was that the Hudsons would own half the business and the Pearsons would own half. They had never seen it as a gift—"Never." Mrs. Hudson insisted, "It was never a gift." "We never saw it as a gift." "We still don't see it as a gift." The Hudsons considered the transfer compensation for Mr. Pearson, without considering that compensation would ordinarily come from the company rather than other shareholders or partners. Their intention was to provide him an interest in their business and compensate Mr. Pearson with part of their stock if he could make the business profitable again. It was unclear what would happen if he did not improve the business.
Mr. Pearson went to work for IEC in 2004 at a salary of $75,000. Mrs. Pearson testified that her parents were excited to go into business with Mr. Pearson so he could help them"pull out of this." The business became profitable; at the end of 2005 the Hudsons received an unprecedented bonus.
Mrs. McQueen died February 24, 2005. Her shares and the trust shares passed to the heirs, subject to probate administration. Mrs. McQueen's will left all the IEC stock to Mrs. Hudson, but she was to pay her sister a sum to equalize their inheritance. The Hudsons paid the sister in March 2006.
After Mr. Pearson was in control, IEC retained attorney Bill Leighton, Mr. Pearson's friend2 and golf acquaintance, to convert the company from a Sub-S corporation to a limited partnership for tax reasons. The new business was named IEC Company, Ltd. Another entity, IEC Management Company, LLC, was created to be the 1% general partner, with Mr. Hudson as the owner.
The conversion and partnership documents, prepared by Leighton, were signed February 7, 2006, with an effective date of conversion September 30, 2005. The Hudsons signed the documents. Although no interest in the business had been transferred to him, the documents stated that Mr. Pearson was a...
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