Smith v. Smith

• Decision Date: 29 June 2000
• Citation: 22 S.W.3d 140
• Parties: <!--22 S.W.3d 140 (Tex.App.-Houston 2000) BRUCE SMITH, Appellant V. KATHLEEN SMITH, Appellee NO. 14-96-01080-CV In The Fourteenth Court of Appeals
• Court: Texas Court of Appeals

Page 140

22 S.W.3d 140 (Tex.App.-Houston [14th Dist.] 2000)

BRUCE SMITH, Appellant

V.

KATHLEEN SMITH, Appellee

NO. 14-96-01080-CV

In The Fourteenth Court of Appeals

June 29, 2000

On Appeal from the 257th District Court Harris County, Texas Trial Court Cause No. 94-32744

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Panel consists of Chief Justice Murphy and Justices Hudson and Senior Justice Lee. ^*

MAJORITY OPINION ON REHEARING

NORMAN LEE, Justice (Assigned).

We deny the motions for rehearing filed January 3, 2000 and January 18, 2000. We withdraw our opinion of December 2, 1999, and substitute the following.

This is an appeal from the property division in a divorce case. Bruce and Kathleen Smith were married on April 21, 1990. Two children were born during the marriage. The Smiths were separated on July 8, 1994, and soon thereafter Mrs. Smith petitioned for divorce. After a bench trial, the trial court entered the divorce decree, naming Mrs. Smith as the children's sole managing conservator and dividing the marital estate between the parties. The trial court filed findings of fact and conclusions of law. In five points of error, Mr. Smith complains the trial court erred in (1) awarding his separate property to Mrs. Smith, (2) characterizing some of the funds in Mrs. Smith's retirement plan as her separate property, and (3) refusing to allow the appellant to have advisory counsel present during the trial. We find the trial court committed reversible error by mischaracterizing Mr. Smith's separate property as community property and by divesting Mr. Smith of his separate property. We reverse and remand on the issue of the property division.

STANDARD OF REVIEW

In his first four points of error, Mr. Smith complains the trial court erred in dividing the marital estate. The trial court has broad discretion in dividing the marital estate at divorce. See Murff v. Murff, 615 S.W.2d 696, 698 (Tex. 1981). Upon appeal, we presume the trial court used its discretion and will reverse the cause only where the trial court clearly abused that discretion. See id. A clear abuse of discretion is shown only if the division of the property is manifestly unjust and unfair. See id.; Hanson v. Hanson, 672 S.W.2d 274, 277 (Tex. App.-Houston [14th Dist.] 1984, writ dism'd w.o.j.). We must remand the entire community estate for a new division when we find reversible error that materially affects the trial court's "just and right" division of the property. See Jacobs v. Jacobs, 687 S.W.2d 731, 732 (Tex. 1985).

Appellant's first four points of error also challenge the legal and factual sufficiency of the evidence. When we review a challenge to the legal sufficiency of the evidence, we consider only the evidence and inferences tending to support the trial court's findings and disregard all evidence and inferences to the contrary. See Weirich v. Weirich, 833 S.W.2d 942, 945 (Tex. 1992). In reviewing the factual sufficiency of the evidence, we must consider and weigh all the evidence and should set aside the judgment only if that judgment is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

We will review fact findings in a bench trial for legal and factual sufficiency of the evidence by the same standards used in reviewing the evidence supporting a jury's verdict. See Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996). We review the trial court's conclusions of law de novo as legal questions. See Piazza v. City of Granger, 909 S.W.2d 529, 532 (Tex. App.-Austin 1995, no writ). This court will follow a trial court's conclusion of law unless it is erroneous as a matter of law. See id.

ATLANTIC FEDERAL CREDIT UNION ACCOUNT

In his first and second points of error, Mr. Smith argues that the trial court erred in characterizing funds in the parties' Atlantic Federal Credit Union ("AFCU") bank account as community property and awarding to Mrs. Smith about half of the funds, approximately $50,000. He contends that the evidence was legally and factually insufficient to support the trial court's finding that the funds remaining in the account were community property. We agree.

As a general rule, property possessed by either spouse during or on dissolution of marriage is presumed to be community property, and a spouse must present clear and convincing evidence to establish that such property is separate property. See Tex. Fam. Code § 5.02.¹ Clear and convincing evidence is the degree of proof that will produce in the mind of the trier of fact a firm belief or conviction about the allegations sought to be established. See Tex. Fam. Code § 11.15(c)²; Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 31(Tex. 1994). To overcome this presumption, the spouse claiming certain property as separate property must trace and clearly identify the property claimed to be separate. See McElwee v. McElwee, 911 S.W.2d 182, 189 (Tex. App.-Houston [1st Dist.] 1995, writ denied). Tracing involves establishing the separate origin of the property through evidence showing the time and means by which the spouse originally obtained possession of the property. See Hilliard v. Hilliard, 725 S.W.2d 722, 723 (Tex. App.-Dallas 1985, no writ).

The evidence cited from the record reveals that the funds in the AFCU account originated from damages awarded to Mr. Smith in a lawsuit he filed before his marriage to Mrs. Smith. The suit arose out of misrepresentations made to him during the purchase of a townhouse.³ Although the misrepresentation suit was filed before the marriage, the trial, appeal, and ultimate recovery of damages took place during the marriage. As a result of the suit, Mr. Smith was awarded a gross amount of $256,248.91. Mr. Smith does not dispute that $81,940.41 of this gross recovery was pre- and postjudgment interest earned during the marriage and was, therefore, community property. See Tex. Fam. Code § 5.01(b).⁴ He contends that the remainder of the gross award, $174,308.50, and the funds remaining in the account at the dissolution of marriage, approximately $100,000, were part of his separate estate.

To support his claim, Mr. Smith relies upon the inception-of-title rule. Property is characterized as "separate" or "community" at the time of the inception of title to the property. See Parnell v. Parnell, 811 S.W.2d 267, 269 (Tex. App.-Houston [14th Dist.] 1991, no writ). Inception of title occurs when a party first has right of claim to the property by virtue of which title is finally vested. See Strong v. Garrett, 148 Tex. 265, 271, 224 S.W.2d 471, 474 (1949); Winkle v. Winkle, 951 S.W.2d 80, 88 (Tex. App.-Corpus Christi 1997, pet. denied). Here, Mr. Smith's right to claim damages relating to the purchase of the townhouse arose before his marriage to Mrs. Smith. Therefore, even though he did not recover for these damages until after the marriage, the damages were his separate property. See Roach v. Roach, 672 S.W.2d 524, 530-31 (Tex. App.-Amarillo 1984, no writ) ("It is a familiar principle of law that the separate or community character of property is determined not by the acquisition of the final title ... but by the origin of title.").

Mrs. Smith argues that Mr. Smith's right to claim the damage moneys relating to the townhouse purchase did not arise until after the trial court awarded him these moneys, which occurred during the marriage. Until he was awarded the damages, she argues, Mr. Smith did not have a legally enforceable right to the damages; he had, rather, a mere possibility of recovery. Therefore, she argues, the entire gross amount and that remaining in the account were community property. See Wrightsman v. Commissioner of Internal Revenue, 111 F.2d 227, 228 (5th Cir. 1940).

We disagree with this argument. For Mr. Smith to establish the damage award as his separate property, his right to the damages was not required to vest completely before marriage. To establish the award as his separate property, Mr. Smith merely had to show that before the marriage he had a right to claim the damages, he pursued that right, and the right to claim the damages later ripened. As the Fifth Circuit noted in Wrightsman, where the title has its inception in a claim or right that for whatever reason is not enforceable, so long as that claim is asserted throughout the limitations period, the title is referable not to the end of the limitations period but to the beginning of the assertion of the claim of right. Id. at 299.

Or as another commentator has said,

The status of the property of marital partners is determined by the time and circumstances attending its "acquisition." It is therefore helpful to keep in mind what is meant by "acquired." The term signifies the origin or inception of the right, rather than its later ripening or fruition.

Speer's Marital Rights in Texas § 388 (4th ed.).

Here, the damages that gave rise to Mr. Smith's cause of action for misrepresentation in the purchase of the townhouse occurred before the marriage. Therefore, Mr. Smith's right to the claim arose before marriage. The lawsuit was initiated before the marriage and pursued until his legal right to the $256,248.91 award ripened.

This conclusion accords with Lewis v. Lewis, 944 S.W.2d 630 (Tex. 1997). There the Supreme Court found that where an unmarried worker suffered a job-related injury for which he claimed compensation, the net proceeds of the settlement remained his separate property even where the settlement was paid after the worker had married. The high court reasoned that the worker's loss was fully incurred before the community even existed. See id.

Like Lewis, Mr. Smith suffered damages before marriage even though he was not compensated until after the marriage. Following Lewis, we find the damages recovered in the suit are Mr. Smith's separate property.

Mrs. Smith also argues that the $57,600 of Mr. Smith's gross recovery representing...