Alsenz v. Alsenz

101 S.W.3d 648

Richard H. ALSENZ, Appellant, v. Marjorie Sue ALSENZ, Appellee.

No. 01-01-00369-CV.

Court of Appeals of Texas, Houston (1st Dist.).

February 27, 2003.

COPYRIGHT MATERIAL OMITTED

David B. Black, Vanderpool, for appellant.

Richard Lee Daniels, Bellaire, Sallee S. Smyth, Short & Jenkins, L.L.P., Houston, for appellee.

Panel consists of Justice HEDGES, KEYES, and DUGGAN.^*

OPINION

EVELYN V. KEYES, Justice.

We are asked to determine whether the trial court's division of property pursuant to a divorce between appellant, Richard H. Alsenz, and appellee, Marjorie Sue Alsenz, was just and proper. In an issue of first impression, we must decide whether royalty payments received during marriage from inventions patented before the marriage should be classified as community or separate property.

Richard contends: (1) we should abate this appeal and direct the trial court to make findings of facts and conclusions of law; (2) he is entitled to a new trial because Sue did not disclose on her inventory a $39,565 accounts-payable claim; (3) the trial court mischaracterized his separate property as community property; and (4) the trial court abused its discretion in (i) awarding Sue 60% of certain assets, (ii) reimbursing Sue 50% of community funds that Richard lost in stock market day trading, and (iii) reimbursing Sue 50% of community funds spent on Richard's car.

We reverse and remand.

Factual & Procedural Background

Richard holds a master's degree in physics. He is an inventor who is consideyed an expert in the field of refrigeration; he has invented and patented more than 35 devices that improve electronic refrigeration. In 1975, Richard founded Altech Controls, Inc. to develop and market his inventions. He is currently the president and majority shareholder of Altech, and has assigned all of his patents to the company. Some of these patents result in marketable products; others do not.

Richard and Sue married in 1996. Shortly after the marriage, Altech hired Sue as a consultant. Sue formed the "MSA" corporation to receive her salary from Altech plus income from items she sold on EBay, an internet auction site. Sue and Richard had no joint bank accounts or joint credit cards; each deposited their income into separate bank accounts.

Neither the marriage nor the business fared well. The record is replete with instances of marital discord. The record also reflects that, by 2000, Altech's sales decreased from $4 million to $1.5 million, its employees decreased from 37 to 12, and the remaining employees took pay cuts.

In addition to drawing a salary from Altech, Richard receives royalties of 4 percent of the gross sales of products developed from his inventions. During his marriage to Sue, Richard received $706,730.56 in royalties from the sales of devices he invented, patented, and assigned to Altech before the couple married. Richard deposited these royalties into his separate bank account. None of the inventions he developed during his marriage to Sue is currently generating royalties. Whether any of these inventions will generate royalties in the future depends upon several factors, including Altech's financial means to develop a product from the invention and the ability to market it successfully. Sue has not asked for a share of any future royalties from the inventions patented during the marriage.

Richard petitioned for divorce in June 2000. In a pretrial ruling, the court declared Richard's royalty income to be community property. In January 2001, after a 4-day bench trial, the court granted the parties a no-fault divorce decree, granted Sue's request for a protective order, and divided the property unequally. Richard and Sue agreed on a more practical property division, stipulating to a calculation that recognized the nature and value of their respective reimbursement claims, and the trial court incorporated these agreed changes into its final decree.

The trial court did not file requested findings of fact and conclusions of law and denied Richard's motions for new trial and to vacate the decree. While this appeal was pending, Richard and Sue entered into a partial Rule 11 settlement agreement regarding the marital residence. TEX.R. CIV. P. 11. Sue relinquished her interest in the house and promised to execute a special warranty deed in exchange for recovery of her personal property.

As a threshold matter, we address Sue's argument that the agreements reached between the parties after the divorce decree was issued act as a bar to Richard's complaints on appeal. She cites no authority to support her contention that the partial agreement operates as a consent judgment. She likewise cites no authority to show that Richard waived his right to complain about certain aspects of the property division because the parties were able to agree about other aspects of the division. We reject these arguments, and turn to Richard's appellate issues.

Findings of Fact and Conclusions of Law

In issue one, Richard argues that the trial court erred in not making requested findings of fact and conclusions of law. He contends that he has been forced to guess at the trial court's basis for its rulings. A trial court's failure to file findings of fact and conclusions of law is presumed reversible, unless the record affirmatively shows that the requesting party was not harmed by their absence. Tenery v. Tenery, 932 S.W.2d 29, 30 (Tex.1996). If a party is prevented from presenting his case on appeal, he has been harmed. Id.

Although Richard contends that the trial court's rendition and decree are confusing and that he cannot discern what amounts were allowed for the parties' reimbursement claims, the record does not support this contention. The attachments to the decree clearly identify the nature and source of all of the couple's financial assets and debts, their claims for reimbursement, and the proportion of the court's division. Thus, it is possible to follow each asset, claim, and debt from its inception to its ultimate disposition. Moreover, Richard does not appear to have had any problem presenting his case on appeal. Accordingly, we conclude that he has not been harmed by the absence of findings of fact and conclusions of law.

We overrule issue one.

Royalty Payments

In issue three, Richard contends the trial court erred by characterizing the royalty payments he received on his patents during the marriage as community property instead of separate property, thus divesting him of his separate property. A spouse's separate property consists in part of property owned or claimed by the spouse before marriage. TEX. FAM. CODE ANN. § 3.001(1) (Vernon 1998). 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).

The characterization of property as either "community" or "separate" is determined by the inception of title to the property. Barnett v. Barnett, 67 S.W.3d 107, 111 (Tex.2001); Smith v. Buss, 144 S.W.2d 529, 532 (Tex.1940). Inception of title occurs when a party first has the right of claim to the property. Strong v. Garrett, 148 Tex. 265, 224 S.W.2d 471 (1949); Wierzchula v. Wierzchula, 623 S.W.2d 730, 731 (Tex.Civ.App.-Houston [1st Dist.] 1981, no writ).

No Texas case has addressed when inception of title to patent rights occurs. Arguably, inception may occur at any of three times: (1) when the concept is sufficiently developed to generate a plan to build the invention; (2) when the invention is actually built; or (3) on the effective date of the patent. 2 VALUATION & DISTRIBUTION OF MARITAL PROPERTY § 23.07[2] (Matthew Bender & Co. ed.1997). However, this is not a question that this Court need decide today. All three of these steps occurred before Richard's marriage to Sue. Thus, inception of title to Richard's patents clearly occurred before marriage and the inventions are Richard's separate property. TEX. FAM.CODE ANN. § 3.001(1). Rather, we address whether the royalty payments from those inventions received during the marriage should be classified as community or separate property, another issue as yet unresolved by any court.

Property possessed by either spouse on dissolution of marriage is presumed to be community property. TEX. FAM.CODE ANN. § 3.003 (Vernon 1998). To defeat this presumption, a spouse must establish by clear and convincing evidence that property is separate property. Id. The record does not reflect whether the royalties paid to Richard during the marriage were kept in a separate account or spent on community expenses. Even assuming Richard could trace these funds, however, we are not convinced that the royalty payments were separate property.

In general, income produced from separate property is considered community property. Arnold v. Leonard, 114 Tex. 535, 273 S.W. 799, 803 (1925). This is usually true regardless of the nature of the separate property, whether the separate property generating income is stock or shares in a corporation, a trust, real estate, livestock, or other assets. See Smith v. Lanier, 998 S.W.2d 324, 332 (Tex.App.-Austin 1999, pet. denied) (cash dividends on separately held stock are community property); Ridgell v. Ridgell, 960 S.W.2d 144, 148 (Tex.App.-Corpus Christi 1997, no pet.) (income from trust is community property); McElwee v. McElwee, 911 S.W.2d 182, 188-89 (Tex.App.-Houston [1st Dist.] 1995, writ denied) (rental payments, crops, timber are community property); Gutierrez v. Gutierrez, 791 S.W.2d 659, 664-65 (Tex.App.-San Antonio 1990, no writ) (offspring born to cattle during marriage are community property); Harris v. Harris, 765 S.W.2d 798, 802 (Tex.App.-Houston [14th Dist.] 1989, writ denied) (profit-sharing distributions are community property). Sue argues that the royalties here are in the nature of such income.

An exception to the general rule that income from separate property is community property concerns oil-and-gas...