Court Must Assign Value to Lease in Texas Divorce

Court Must Assign Value to Lease in Texas Divorce

Originally published by Robert Epstein.

By

A trial court in a Texas divorce must divide community property in a just and right manner.  Property can be somewhat broadly defined as it relates to property division in a divorce case.  Many people do not realize that a lease of someone else’s property is subject to division in a divorce, unless the lease is shown to be separate property.

In a recent case, the wife challenged a property division that did not include a recreational lease held by the husband.  The wife appealed the property division, arguing error in the trial court’s division of property.  She argued the court failed to include a recreational lease in the community estate and that the court unfairly allocated the husband’s tax debt.  The court had allocated all of the tax debt to the husband, but the wife argued the court erred in using it to offset the value of the assets awarded to the husband.

At trial, there was evidence the husband signed a written lease for a ranch during the marriage.  The husband’s friend owned the property and testified the husband had helped him build or enhance some of the improvements on the property.  The owner testified he would sell the ranch to the husband for a significant discount and indicated he would extend the lease to the husband indefinitely as long as he paid the rent.

 

The wife argued the husband was an owner of the ranch and was hiding his ownership interest from the IRS.  The trial court found the husband did not own the ranch.  The wife moved for reconsideration, arguing the court should assign value to the lease.  The court rejected her argument.

The wife did not argue the husband had an ownership interest in the ranch on appeal.  She argued that the leasehold interest should have been included in the property division.  A lease of property acquired during marriage is generally subject to division unless it is shown to be separate property by clear and convincing evidence.  The ranch lease was executed during the marriage and extended beyond the divorce; therefore it was presumed to be community property.  No evidence otherwise was presented.  The appeals court found it was not within the trial court’s discretion to find the lease was not community property.  The court, however, should have determined if the lease had enough value to affect the division of the estate.

The trial court did not assign any value to the lease, and there was not sufficient evidence presented for it to do so.  Community property is generally valued at “market value.” That is, the amount a willing buyer who wants to but has no obligation to buy would pay a willing seller who wants to sell but is not obligated to sell.  If there is no market value, the parties may show the property’s actual value to its owner.

There had been evidence at trial of the market value of the ranch itself, but not the value of the lease.  The only related evidence was the amount the husband paid for rent, but there was no evidence regarding whether that amount represented the actual value of the lease, or if the husband had possibly received a good deal due to his relationship with the owner.  The appeals court also noted it was possible the nearly $200,000 the husband would pay in rent over the 10-year lease term could be greater than the value of the lease.  The appeals court found there was insufficient evidence to determine if the lease was a community asset, community debt, or was too inconsequential to have an effect on the property division.

The appeals court noted both parties have a responsibility to provide sufficient evidence regarding the community estate’s value to allow the court to divide the property in a just and right manner.  In some cases, courts have held that a party who fails to provide sufficient evidence of property’s value cannot later challenge the trial court’s division of the property on the grounds it had insufficient evidence.  The appeals court noted this type of waiver may be appropriate where there was some evidence of the property’s value or where the unvalued property would have little effect on the total division.  With no evidence of the lease value and its total omission from the property division, the waiver would not be appropriate here.  Without evidence of the value of the lease, the trial court could not achieve a “just and right” property division.

The appeals court affirmed the divorce, but reversed the property division.  Because the appeals court reversed and remanded for a new property division, it did not address the challenge regarding the tax liability.

If you are facing a complex high-asset divorce, the skilled Texas divorce attorneys at McClure Law Group can help you fight for a fair property division.  Call us at 214.692.8200 to talk about your case.

 

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.



Read More –>

Award of Retirement Increases in Texas Divorce

Award of Retirement Increases in Texas Divorce

Originally published by Kelly McClure.

By

Retirement can be a complex issue in Texas divorce cases.  In some cases, retirement accounts may not be fully vested.  In others, retirement income may be subject to periodic increases.  When retirement income is subject to increases, the spouse required to make ongoing payments should be sure he or she understands how to calculate those payments in light of the increases.

A former couple recently ended up back in court more than a decade after their divorce due to a dispute over how to calculate retirement increases.  The couple married in 1976 and divorced in 1998, after the husband’s retirement from the military.  The wife was awarded $754.80 per month of the husband’s retirement, and 60% of all increases “due to cost of living or other reasons…”  The husband was ordered to name the wife beneficiary under the Armed Services Survivor Benefit Plan (SBP).  The wife was ordered to pay 40% of the cost of the SBP, which was to offset the retirement award the wife received.

In 2012, the wife informed the husband he had underpaid her.  His new attorney told him he had been calculating his payments incorrectly. He had been calculating the payment using a method that resulted in payment of 60% of all cost of living increases cumulatively.  After receiving advice from counsel, he began paying his wife 60% of the increases only in the first year they were received.

The wife petitioned to enforce the retirement award, claiming she had been underpaid.  The husband argued he had overpaid her and that she had not paid the SBP premiums.  At trial, the wife testified she was owed more than $7,000 and that she had paid the SBP premiums according to the prior ruling.  The husband did not provide evidence of the overpayment amounts or the SBP premiums he claimed were owed to him.

The court found that the wife was entitled to $754.80 per month as her share of the husband’s retirement, and 60% of any cost of living increase in the year it was first received.  The court awarded the husband $2,617.57, but did not state how it calculated that amount or how it was allocated between the overpayments and SBP premium underpayments.

On appeal, the wife argued the original decree required the husband to pay 60% of any increases cumulatively.  She also argued the evidence was insufficient to support the trial court’s finding she had not paid the SBP premiums as required.  The husband argued the trial court had correctly interpreted the original award.

The appeals court considered whether the trial court had sufficient evidence to exercise its discretion and whether the court erred in application of that discretion. Evidence is insufficient if there is a complete absence of evidence regarding a vital fact, the rules of evidence do not allow the court to give weight to the only evidence supporting a vital fact, there is a “mere scintilla” of evidence supporting a vital fact, or the evidence establishes the opposite of the vital fact conclusively. The court errs in the application of its discretion if it makes an arbitrary or unreasonable decision.

The appeals court had previously decided a case with similar language regarding increases in retirement income.  In that case, the appeals court held the wife was entitled to the fixed amount plus the percentage of the accumulated cost of living increases.  The appeals court referred to the husband’s argument that she only receive the percentage during the first year as “a tortured reading of the divorce decree.”  The appeals court noted that the wife’s share is based on the accumulated increase because the husband receives base retirement pay plus the accumulated adjustments.

The trial court abused its discretion in finding the wife was only entitled to the increases during the first year. The appeals court further found that the order improperly amended, modified, altered, or changed the substantive division of property in the divorce decree.

In its opinion, the appeals court rendered judgment clarifying the divorce decree to provide that the wife is entitled to “60 percent of all accumulated increases…”  The appeals court found the husband was entitled to nothing on his claim for overpayment of the retirement award.  It remanded the wife’s claim to the trial court for proceedings to determine the amount of the underpayments.

The appeals court then considered the SBP premium claim.  To succeed on his claim to enforce the premium obligation, the husband had to prove his wife failed to comply with the obligation and prove the underpayment amount.  The evidence presented on this issue indicated the wife deducted her premium obligation from the amount the husband owed her and paid him $138.43 each month since 2013.  There was no evidence in the record of missing premium payments.

The appeals court found “a complete absence of evidence” supporting the husband’s claim.  The trial court abused its discretion by finding the wife had not met her obligation when the evidence was legally insufficient to support such a finding.  The appeals court reversed the judgment awarding the husband on his claim for premium payments and rendered a judgment that he receive nothing for that claim.

This case clarifies that an award of increases in retirement income will likely be interpreted to require that the increase in payment to the spouse be ongoing and not limited to the first year unless there is language otherwise.  If you have a dispute with your former spouse over property division, an experienced Texas divorce attorney can help you understand your obligations and fight for your rights.  Call McClure Law Group at 214.692.8200 to schedule a consultation.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.



Read More –>