Blair v. Blair

642 S.W.3d 150

Mark Alan BLAIR, Appellant,

v.Rita Gail BLAIR, Appellee.

No. 08-19-00304-CV

Court of Appeals of Texas, El Paso.

November 19, 2021

ATTORNEY FOR APPELLANT: Rebecca Davis, Law Office of Rebecca Davis, P.L.L.C., 111 W Akard St., Weatherford, TX 76086-5302.

ATTORNEY FOR APPELLEE: J. W. Johnson, 125 S. Irving St., San Angelo, TX 76903.

Before Rodriguez, C.J., Palafox, and Alley, JJ.

OPINION

JEFF ALLEY, Justice

Following a bench trial, the trial court entered a Final Decree of Divorce that, among other things, characterized as community property a tract of land that Appellant Mark Alan Blair (Husband) had purchased prior to marriage. The decree awarded Appellee Rita Gail Blair (Wife) a one-half interest in the property. We agree with Husband that the trial court erred by improperly divesting Husband of his separate property. We therefore reverse the trial court's judgment and remand the matter to the trial court to make a new distribution of the parties’ community property, taking into consideration the proper classification of the property in question, and to further rule on Wife's claim for reimbursement for the expenditures and assets that were utilized in making improvements to Husband's separate property from both her separate estate and the community's estate.

I. FACTUAL AND PROCEDURAL BACKGROUND

The parties were married on October 26, 2002, and separated on June 17, 2015. Shortly after their separation, Wife filed a petition for divorce and Husband responded by filing a counterpetition; both parties sought the divorce on the ground that the other's "cruel treatment" rendered the marriage "insupportable." No children were borne of the marriage, and the primary issue in the trial court, as well as on appeal, pertains to the proper characterization of certain real property that the Husband had purchased prior to the marriage.

A. The Carter Road Properties

On January 10, 2001, Husband used his separate property to purchase a 60-acre parcel of land located at 2531 Carter Road in Springtown, Texas for $120,000. Husband borrowed $20,000 from his parents as a down payment on the parcel, and in exchange provided them with approximately three acres of the land and financed the remaining balance with a third-party lender.

According to Husband's testimony at trial, the previous owner had a "life estate" in a farmhouse that was located on the parcel, and Husband, who was in the construction business, began constructing his own house on a separate area on the parcel. It is unclear, however, how much construction took place prior to the marriage. After the parties were married, Wife used her separate property to purchase a trailer that was moved onto the property for the couple to reside in while construction of the residence continued. Approximately eight months later, the previous owner moved out of the farmhouse, and the couple moved into the farmhouse--which they later rented out--while completing construction of the house. For six or seven years, both Husband and Wife contributed their physical labor to the construction of the house and made various purchases for the construction during that time. Once the house was completed, they used it as their primary residence until their separation.

In the interim, the parties ran into financial problems, and Husband was unable to make timely payments on the original mortgage on the property. Facing the possibility of foreclosure, Husband arranged to borrow $200,000 from a company owned by his parents, which he used to pay off the original mortgage on the house. The record reflects that both Husband and Wife signed a promissory note on or about May 23, 2007, in which they purported to borrow $200,000 from the parents’ company. However, the record also contains a "warranty deed" dated the same day as the promissory note, signed by Husband and Wife as "grantors," conveying to the parents’ company all but the one-acre parcel on which the parties’ home was located, in exchange for $200,000.¹ According to Husband, his parents required the warranty deed as a condition of the loan so that they could sell the property if needed due to his father's declining health. At some point during the marriage, the remaining one-acre parcel on which the couple's house was located was redesignated as 2525 Carter Road (with the balance of the original tract designated as 2531 Carter Road).

With one exception in his trial testimony that we discuss below, Husband claimed that both 2531 and 2525 Carter Road were his separate properties, as he purchased the original 60-acre parcel with separate property funds prior to the marriage. At trial, Wife argued that the property had been transformed into community property because: (1) community funds and efforts went into making improvements on the property; (2) the property was refinanced with a loan taken out in the names of both parties during the marriage; and (3) both parties were named on a series of homestead exemptions that were filed with the local taxing authority.

In the alternative, Wife brought a claim for reimbursement in the event that the trial court characterized the Carter Road properties as Husband's separate property, asserting that both her separate estate and the community estate were entitled to be reimbursed for expenses and assets used to improve and benefit the property during the parties’ marriage. Husband, however, argued at trial that her claim should be denied, asserting that Wife's separate estate had already been reimbursed for any expenses she contributed to the property's improvement, and that Wife had not presented sufficient evidence to support her claim that the community estate was entitled to any reimbursement.

B. The Final Decree and the Trial Court's Findings

Following trial, the court characterized both Carter Road properties as community property, giving each party a 50% interest in 2525 Carter Road, and awarding Husband a 100% interest in 2531 Carter Road. The trial court therefore did not address Wife's alternative claim for reimbursement for the improvements made to the property. In addition, the trial court divided numerous other items of both real and personal property belonging to the community, as well as the community's debts, and ordered each party to bear their own costs and attorney's fees. Husband thereafter filed a motion for new trial, which was overruled by operation of law, and this appeal followed.

II. ISSUES ON APPEAL

In Issue One, Husband contends that both Carter Road properties were his separate property, as they were purchased with separate property funds and that that the trial court erroneously divested him of his separate property when it awarded Wife 50% of the 2525 Carter Road property. In Issue Two, Husband contends that Wife failed to present sufficient evidence to support her claim for reimbursement. And in Issue Three, Husband contends that Wife failed to present sufficient evidence to support Wife's allegations that he engaged in adultery or drug abuse.² Because we conclude that the trial court erred in characterizing the Carter Road properties as being community property, we agree with Husband that the trial court's judgment must be reversed to allow the trial court to make a new division of the parties’ marital estate, and to consider Wife's reimbursement claim for the improvements and benefits she alleges were made to the properties from her separate estate and the community's estate. However, because the trial court made no finding of adultery or drug abuse, we find Husband's third issue to be irrelevant to our analysis.

III. APPLICABLE LAW AND STANDARD OF REVIEW

We start with the long-standing principle that all property on hand at the dissolution of marriage is presumed to be community property. See Long v. Long , 234 S.W.3d 34, 37 (Tex.App.--El Paso 2007, pet. denied), citing Tate v. Tate , 55 S.W.3d 1, 4 (Tex.App.--El Paso 2000, no pet.) ; TEX.FAM.CODE ANN. § 3.003(a). However, this is a rebuttable presumption, and a spouse claiming assets as separate property may establish their separate character by clear and convincing evidence. Id. , citing TEX.FAM.CODE ANN. § 3.003(b). Clear and convincing evidence means the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. See Viera v. Viera , 331 S.W.3d 195, 206 (Tex.App.--El Paso 2011, no pet.), citing TEX.FAM.CODE ANN. § 101.007.

Generally, the characterization of property as separate or community is determined by its character at inception, often referred to as the "inception of title" doctrine. Viera , 331 S.W.3d at 206 ; see also Long , 234 S.W.3d at 37, 39. Both the Texas Constitution and the Texas Family Code define separate property as property owned before marriage, or acquired during marriage by gift, devise, or descent. TEX.FAM.CODE ANN. § 3.002 (under the inception of title doctrine, property owned before marriage, or acquired during marriage by gift, devise or descent, is separate property); TEX. CONST. ART. XVI, § 15 ("All property, both real and personal, of a spouse owned or claimed before marriage, and that was acquired afterward by gift, devise or descent, shall be the separate property of that spouse ...."). It is therefore unconstitutional for a trial court to divest a party of their separate property by awarding any portion of it to the other party in a divorce proceeding. See Eggemeyer v. Eggemeyer , 554 S.W.2d 137, 141 (Tex. 1977) ; see also Zagorski v. Zagorski , 116 S.W.3d 309, 316 (Tex.App.--Houston [14th Dist.] 2003, pet. denied). Unlike other situations in which a trial court has mischaracterized property in a divorce proceeding, improperly divesting a party of their interest in separate property is reversible error as a matter of law without the need to conduct a harm analysis.³ See Rivas v. Rivas , 452 S.W.3d 49, 55 (Tex.App.--El Paso 2014, no pet.), citing Eggemeyer , 554 S.W.2d at 140 ; ...