INTERESTING CASES: June 3, 2015

Sallee S. Smyth

1. Abrams v. Salinas,2015 Tex. App. LEXIS 4575 (Tex. App. – San Antonio May 6, 2015) (Cause No. 04-14-00104-CV)

H and W divorced in 1988. Their decree contained terms ordering that each party would bear 50% of stated costs and expenses associated with their child’s college education. The child was only 4 at the time. Subsequently H ended all contact with his daughter who attended college in San Antonio and obtained a bachelors degree. In preparing paperwork to pursue her master’s the daughter (D) learned about the obligations in the divorce decree. D sent three separate certified letters to her father demanding payment and detailing all college expenses, less credits for scholarships and grants and proof that she had maintained the required grades. When H did not respond W and D sued H to enforce the agreement. H asserted a 4 year SOL as to breach of contract claims. W and D claimed a 10 year SOL based on suit to collect on a dormant consent judgment. The trial court found in favor of W and D and awarded judgment against H who appealed. The COA held that generally an agreement between spouses is enforced as a contract but when it is incorporated into a final judgment and approved by the court it becomes a consent judgment subject to limitations for enforcement of judgments generally. The COA further found that the 10 year SOL, applicable to judgments which obligated payments dependent upon future conditions, begins to run when the payment comes due, not when the judgment becomes final. Considering that the final decree provided no date by which the payments were due, the COA noted that D attended college from Fall 2004 to Spring 2008, making the first payment for a semester in college due in the Fall of 2004. Because W and D brought suit in 2013, they were within the 10 year SOL if it began accruing in 2004. The COA further determined that H failed to specifically deny satisfaction of the condition precedents to payment and that since W and D pled satisfaction, H waived any lack of evidence proving them at trial. Judgment affirmed.

2. Slicker v. Slicker,2015 Tex. App. LEXIS 5201(Tex. App. – Dallas May 21, 2015) (Cause No. 05-13-01762-CV)

H and W married in 1974 and separated in 2011. In 1993, during the marriage, H’s parents created a Trust naming H as the primary beneficiary with all principal and undistributed income to go to W upon H’s death. The Trust was funded with various shares of stock, a partnership interest and certain oil and gas interests and provided that all net income from the Trust would be paid to H annually. Although the records were incomplete evidence established that the Trust had distributed income close to $1 million between 2007 and 2012, however when the case went to trial the Trust held less than $10K in money market funds, a condo worth $125K, a business interest worth $41K, unvalued shares in a general partnership and mineral interests valued at less than $2K. Evidence also established that assets which the community estate could afford were instead purchased through and thereafter owned by the Trust, including the parties’ marital residence. The Trust sold the residence during the divorce proceedings and purchased the condo where H lived. Evidence produced by Bancorp (the Trustee) included correspondence from h to the Trustee requesting that they “recharacterize” distributions. Further during marriage, H and W entered into “Investment Agency Agreements” with Bancorp depositing large sums of money with them for investment purposes and by letter W authorized Bancorp to act on H’s investment decisions. Evidence established that H withdrew $800K from the investment over a single year during marriage but could not account for the use of the funds. When W filed for divorce in 2011 she alleged actual and constructive fraud and waste and requested the court to reconstitute the estate, award her a disproportionate division and award spousal maintenance. W’s only source of income was her social security and at 67 years of age she had not worked outside the home since her marriage in 1974 except for a brief time working for H for which she was not paid. Upon conclusion of trial the court found that H’s fraud should be considered in the division and that the value of the reconstituted estate was $900K. The court awarded W a judgment against H for $275K for waste and constructive fraud, another $66K for money improperly spent during the divorce proceeding and spousal maintenance of $3,500/month for ten years (terminating upon death of either party or W’s remarriage). H appealed challenging the sufficiency of the evidence to support all of the trial court’s rulings. The COA affirmed finding that H failed to carry his burden to account for the substantial sums withdraw from the investment fund and received from the Trust during marriage. H claimed that the parties spent the funds on a lavish lifestyle which included several trips to Europe and travels across the U.S. W was never questioned about the use of the funds and testified that she was unaware of the large withdrawals. W’s psychologist testified that H controlled W and the finances and that upon separation W had high levels of anxiety and depression and that they worked on building W’s self-esteem. The COA found that the trial court did not abuse its discretion in discounting H’s explanations regarding use of the funds on a lavish lifestyle, further noting the trial court’s concerns over H’s substantial failure to comply with discovery and production requests during the divorce proceeding and his improper use of funds contrary to the temporary orders. The COA further found the evidence sufficient to establish W’s inability to meet her reasonable needs justifying spousal maintenance. Judgment affirmed. COMMENT: Although this case offers no significant holdings it is included to demonstrate more examples of fact patterns and evidence being offered to support claims under TFC 7.009, the still relatively new “reonstitution” statute.

3. Phillips v. McNease, 2015 Tex. App. LEXIS 5171 (Tex. App. – Houston [14th Dist.] May 21, 2015) (Cause No. 14-14-00161-CV)

H and W divorced in 1998. As part of their agreement, incorporated into a final decree, H agreed to pay W “contractual alimony” of $1,500/month for her life, and if he predeceased her it was to continue to be paid by his estate, only terminating upon her death or remarriage. In 2002 H filed a motion to modify asserting that the trial court had jurisdiction to modify the payments as spousal maintenance based on a material and substantial change. H claimed that W’s income had substantially increased (while his had decreased) and that she was capable of self-support. H sought to have the payments terminated completely and argued that they contravened the spousal maintenance statutes. H further argued that the contract for contractual alimony lacked consideration and was void as unconscionable. W argued that the trial court had no jurisdiction because H’s motion equaled a collateral attack on the judgment and was barred by res judicata and collateral estoppel. In 2003, the trial court denied W’s claims of lack of jurisdiction and found a material and substantial change, reducing H’s obligations to $1,250 per month with all other terms remaining the same. Neither party appealed from this judgment. In 2012 H filed another petition to modify seeking to modify and/or terminate the payments. As grounds alleged under the Family Code, H alleged material changes due to a recent heart attack, substantial medical expense and loss of his job and bonus forfeiture. He also asserted numerous contract theories as grounds supporting his request to set aside the entire alimony contract, including a theory called “frustration of purpose.” W again filed a plea to the jurisdiction arguing that the court had no authority to modify contractual alimony under the Family Code. W filed both traditional and no-evidence MSJ’s arguing only her defense to the contract claims. H responded that the trial court’s jurisdiction over his claims under the Family Code had been established in 2003 when the court previously modified the payments and no one appealed. He further argued that the term “alimony” in the decree was synonymous with spousal maintenance and the trial court was authorized to modify the payments under the Code. F attached numerous exhibits to his SJ response, all of which W objected to for lack of proper authentication. The trial court sustained W’s evidentiary objections and granted her SJ motions. The trial court signed a final judgment which purported to dismiss the entirety of H’s claims, recited that the plea to the jurisdiction had also been considered and included a Mother Hubbard clause. H appealed. Initially the COA considered its jurisdiction over the appeal, based on H’s claims that the summary judgment failed to dispose of his Family Code claims since they were not addressed in the SJ motions themselves. The COA concluded that language in the final judgment effectively demonstrated that all parties and claims had been disposed of (even if they should not have been), thus the judgment was final for appellate purposes. Recognizing that W’s SJ motions did not address any defense to H’s Family Code claims, the COA found that it was error for the trial court to dispose of these claims by summary judgment and that reversal and remand on those claims was required. The COA rejected W’s argument that remand was unnecessary based on W’s claim that the trial court had no jurisdiction to modify contractual alimony. The COA held that H’s claims fell within the constitutional and statutory jurisdiction given to the trial court over “family law” matters and that is was then up to the trial court to determine whether the claims had merit, noting that a court can have jurisdiction over a claim even where a party is in capable of prevailing. The COA was clear to express no opinion on the merits of H’s Family Code claims or the effect of the trial court’s prior modifications. As to the summary judgment on H’s contract claims, the COA sustained the no-evidence SJ relating to the “frustration of purpose” argument. The COA recognized this theory as one which must establish the impossibility of performance and that although H’s SJ evidence showed improved financial conditions for W and changed financial conditions for himself, this evidence did not establish that it was impossible for H to perform, only that it was more burdensome, which was insufficient. As to H’s claims surrounding the formation of the contract, the COA agreed with W that H was barred from asserting lack of consideration and unconscionability on the basis of res judicata as H had made these same arguments in the first modification suit and they had been denied. Further the balance of H’s contract formation claims were known or should have been known then and with due diligence could have been asserted in the first modification but were not so they were also barred by res judicata. Finding that H offered no SJ evidence creating a fact issue on W’s affirmative defenses, the COA affirmed SJ on the contract grounds. Finally, the COA overruled H’s public policy arguments noting that the final decree contained the parties’ express agreement as to alimony with no separate agreement prior to rendition being required and further that H was free to negotiate at the time of divorce and the contractual nature of his perpetual alimony agreement did not violate public policy limiting the terms of court-ordered spousal maintenance. Judgment affirmed with respect to all but the H’s Family Code claims which are remanded to the trial court for adjudication.

1