Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:This is an appeal by the husband from a distribution of property in a divorce proceeding. Bessie Nelson and Kenneth Nelson were married in 1995. Before the marriage, Kenneth purchased five acres of land from his parents. Bessie did not know at the time they married that Kenneth still owed $8,000 to his parents for the land. Bessie had sold her own house and put the $17,500 in proceeds in Kenneth’s checking account. Kenneth and Bessie built a home on the five acres. They did most of the work themselves, starting construction several months before the wedding, so that it was nearly complete when they married. They spent $16,616.51 on their house before they married from the proceeds of Bessie’s house sale, and spent approximately $5,600 in community funds after they married to complete the house. The couple ultimately paid Kenneth’s parents $2,000 in full satisfaction for the money Kenneth still owed them on the five acres. During their marriage, they also bought an adjoining 12.03 acre tract of land from Kenneth’s parents. The trial court granted Kenneth and Bessie a divorce. The court awarded each an undivided one-half interest in the 12.03 acre tract purchased during their marriage and held that the five acres and improvements were Kenneth’s separate property. The court found that the community estate had a claim for an economic contribution regarding the five acres and that Bessie’s separate estate had a reimbursement claim of $16,600. Bessie received an excess allocation of community property of $11,000. After offsetting this against Bessie’s reimbursement claim and her portion of the economic contribution claim, the court awarded Bessie $14,800 and ordered Kenneth to sign a promissory note to her for that amount, secured by a lien on his five acres. Finally, the trial court appointed a receiver to sell the 12.03 acre tract of land if Kenneth and Bessie did not want to retain the land and neither could buy out the other within 30 days. Kenneth appealed the trial court’s property distribution on seven points. He asserted that the trial court erred in awarding a awarding a claim for economic contribution for the payment of his debt to his parents, in conditionally ordering the appointment of a receiver to sell the 12.03 acre community property, in characterizing the $16,616.51 spent from the net proceeds of Bessie’s home sale as her separate property, in finding that Bessie was entitled to reimbursement of those funds, in finding that the community estate was entitled to economic contribution for capital improvements to Kenneth’s separate property, and in placing a lien on Kenneth’s separate property to ensure his payment to Bessie. HOLDING:Affirmed in part and reversed and remanded in part. The court finds that the trial court abused its discretion in awarding the economic contribution for Kenneth’s $2,000 debt to his parents. Section 3.402 of the Texas Family Code provides six instances in which an economic contribution claim may be created, including the reduction of a prenuptial debt secured by a lien on property owned by the marriage. As the Family Code does not define “lien” or “secured by a lien,” the court looked to definitions of “lien” in the Texas Business and Commerce Code for guidance. The court held that a lien requires more than an obligation to repay a debt; it “requires some instrument, agreement, or act giving one creditor superior rights to collateral over all other unsecured creditors or creditors with a subsequently obtained judicial lien.” Here, there was no evidence that Kenneth’s parents had any greater right to the five acres than any other creditor. The court examines the appointment of a receiver to sell the 12.03 acre tract. The court holds that the trial court failed to first determine if the property was subject to partition in kind. The trial court was required to consider the nature and type of property involved and the relative conditions, circumstances, capabilities, and experience of the parties, and there was no reference to such consideration in its findings of fact and conclusions of law. The court considers the trial court’s characterization of $16,616.51 as Bessie’s separate property. It was Bessie’s burden to trace and identify the property she claimed as separate. Bessie produced checks used to pay construction expenses, some of which were drawn on Kenneth’s account in which she had deposited her house sale proceeds, and some of which were drawn on her own account at another bank. The court holds this evidence sufficient to support the trial court’s finding that the $16,616.51 was Bessie’s separate property. Kenneth contended that even if these funds were Bessie’s separate property, the trial court erred by finding she was entitled to reimbursement because the funds were spent prior to the marriage. The court concludes that, looking at all the facts and circumstances, the trial court did not abuse its discretion in applying equitable principles to award Bessie reimbursement. Her money had helped fund a house on Kenneth’s separate property. Turning to the calculation of Bessie’s reimbursement claim, the court concludes that the proper measure was the extent to which Kenneth’s property was enhanced by Bessie’s contribution. Bessie introduced evidence of the property’s tax assessment Jan. 1, 1995, before the house was built, and the current assessment, and the trial court based its calculation on the difference. Its findings were incorrect, however, because it had listed the property’s value January 1 as if it were the value on the date of the marriage in April, and the court of appeals remanded on this issue. The court explains how the trial court should make the enhancement calculation on remand. The measure was not simply the sum of construction costs that Bessie contributed, but the enhancement in value Kenneth’s property received. The trial court should also consider any benefit that Kenneth’s and Bessie’s respective estates may have received from Kenneth’s separate property. The court reviews the award for Bessie’s economic contribution claim for capital improvements to Kenneth’s separate property. The property’s equity as of the date of divorce should be multiplied by a fraction whose numerator is Bessie’s economic contribution to the property and whose denominator is the economic contribution plus the property’s equity as of the date of the marriage or, if later, the date of Bessie’s first economic contribution. Finally, the court holds that the trial court did not abuse its discretion in imposing a lien on Kenneth’s separate property. The lien was not imposed simply to secure a just and right division of the community property, rather it secured an award to Bessie representing reimbursement and economic contribution arising out of improvements to Kenneth’s separate property. OPINION:Strange, J., Wright, C.J., and McCall and Strange, JJ.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.