INTERESTING CASES: June 3, 2020

Sallee S. Smyth

  1. In re Marriage of Tuttle, 2020 Tex. App. LEXIS 3770 (Tex. App. – Amarillo May 4, 2020) (Cause No. 07-19-00016-CV)

H was the sole shareholder in a SubS corporation. Upon divorce, the trial court included $55K of retained earnings in its calculation of net resources to establish H’s child support. H appealed the child support award. The COA notes at the outset that retained earnings are not included or excluded within the broad parameters of TFC 154.062(a) which defines net resources. Further, neither party cited the COA to any Texas cases which addressed the propriety of considering retained earnings when calculating child support. The COA found none either and thus turned to the treatment of this issue by other states. The COA acknowledged that retained earnings remain corporate property even though they are taxable income to the shareholder. Examining cases from Kansas, Ohio, New Mexico and Illinois, the COA recognized that a hard rule for inclusion or exclusion was inequitable and instead determined that retained earnings could be considered for purposes of calculating child support on a case by case basis, identifying several factors which should be considered. These factors include (1) extent of parents ownership of subchapter S; (2) the parents ability to decide whether or not earnings should be retained; (3) corporate history regarding retention or distribution; (4) financial and operational needs of the company;

  • the excessiveness of the earnings when compared with the company’s financial needs; and
  • any evidence that a parent has engaged in manipulation of retained earnings. The COA noted one case which determined that retained earnings intended to offset a shareholder’s personal tax liability should not be considered in calculating child support. The COA found all of the various out of state considerations to be persuasive in creating a general rule that retained earnings can be considered in light of the specific circumstances of the case. The COA further noted that inclusion should not be based on a single fact but instead an assessment of all the relevant factors. In this case the only evidence submitted was that H was the sole shareholder and had control over the decisions regarding retained earnings. The COA found that this was an insufficient basis for which to include the retained earnings in the calculation because the trial court had no way of knowing whether or not retention was a historic policy or whether the retention was legitimate for business purposes. Because the trial did not have sufficient information to assess all relevant factors, the COA reversed and remanded the issue of child support for further proceedings. H raised a second issue regarding characterization of the marital residence. The COA affirmed finding that H failed to overcome the presumption that H gifted W a U interest in the marital residence when H and W purchased the residence with funds inherited by H but title was taken in both of their names.
  1. In the Interest of V.R.J., 2020 Tex. App. LEXIS 3985 (Tex. App. – San Antonio May 20, 2020) (mem. op.) (Cause No. 04-19-00348-CV)

The parties divorced when VRJ was a year old and F was ordered to pay child support. In November 2015, about 4 months after VRJ turned 18, the trial court signed an agreed order obligating F to continue paying child support, health insurance and uninsured medical expenses based on a finding that VRJ required continued care based on a disability that existed or was know to exist before her 18th birthday. Four months after the agreed order was signed, F filed a motion to modify the order alleging a material and substantial change in circumstances. At the time of this filing, VRJ was still attending high school. An amended motion was filed in 2017 and F asserted that VRJ had never been disabled. The case was tried and F offered evidence that although VRJ had received disability benefits as a child, she had been denied those benefits by the SSA when she applied as an adult. Further, he offered evidence that she had graduated from high school and that she did not need substantial care. M offered evidence from VRJ’s treating physician who testified as to her mood disorder which resulted in several hospitalizations and her inability to work around other people. There was also evidence that she suffered from scoliosis, back pain and ongoing seizures of an undetermined nature. M testified that she did not leave VRJ alone when she went to work and VRJ testified about two jobs that she attempted but was able to keep for only a short period of time. The trial court denied F’s motion to modify and F appealed. F argued that he offered sufficient evidence of change, relying heavily on the SSA denial of disability benefits once VRJ turned 18. The COA noted that although the Social Security Act does define “disability” the Family Code does not and trial courts have wide discretion in determining the nature and scope of a disability that would justify an order for ongoing support. Further the COA notes that the denial of benefits was dated prior to the 2015 agreed order for continued support. The evidence established that M appealed the decision and it was reconsidered but denied a second time after the date of the agreed order but the COA found that this did not establish any material change. The COA further concluded that the evidence of VRJ’s physical and mental health established that her condition was ongoing and thus there had been no substantial changes. Finally the COA found the evidence sufficient to support the continued needs of the child. Judgment affirmed.

  1. Derbez v. Derbez, 2020 Tex. App. LEXIS 4040 (Tex. App. – Amarillo May 21, 2020) (mem. op.) (Cause No. 07-19-00018-CV)

H and W married in TX in 1986. H is a citizen of Mexico. During marriage the parties acquired residence in TX and in Mexico. The family business was run in Mexico. In 2015, H sued W for divorce in Mexico. She initially participated in the proceedings but later objected that because she lived in TX with the parties minor child, jurisdiction was proper in TX. The Mexican courts rejected her arguments and purportedly granted a divorce to H in April 2016. In August 2016, W filed a petition for divorce in TX. H appeared pro se but eventually retained counsel. The case lingered on the docket and went to trial in February 2018. Both parties appeared with counsel. At trial, W offered testimony about agreements she and H had reached wherein H would pay her various sums for support to assist her in obtaining a car and to obtain a real estate license. With the assistance of a translator, H testified that he agreed to all of the financial obligations stated by W. Believing there was an agreement, H’s attorney did not cross examine H. The trial court pronounced the parties divorced in accordance with the agreement. After the trial, H claimed he did not understand the proceedings and he expressed concern about being able to afford the payments. H wrote a letter to the judge expressing dissatisfaction with his counsel who was thereafter allowed to withdraw. H retained new counsel who, in July 2018, filed a plea to the jurisdiction, asserting for the first time that the parties had been divorced in Mexico in 2016 and thus the TX court had no subject matter jurisdiction to grant a divorce and property division. The plead had many attachments, some in Spanish, but not translated. No hearing was ever held on the plea to the jurisdiction and in October 2018 the trial court signed a Final Decree. 32 days after the Final Decree was signed, H’s attorney filed a motion to dismiss for lack of jurisdiction. This motion contained many attachments, all translated, including an affidavit from an expert who had reviewed all matters and confirmed the parties 2016 divorce in Mexico. Because the trial court’s plenary power expired after 30 days, the court never heard or considered the late filed motion to dismiss. H perfected an appeal. After all briefing was filed in the COA, H filed a motion in the COA asking it to take judicial notice under TRE 201 of the Mexican divorce. This request included all of the translated attachments and the expert’s affidavit opinion. The COA notes that questions regarding subject matter jurisdiction are reviewed de novo. Here the COA determines that while pleas to the court’s jurisdiction can be filed at any time, the rules for judicial notice of foreign law require a party to plead and prove the foreign law. TRE 203 Further, when documents must be translated, admissibility of those translations are governed by TRE 203 and 1009 which requires them to be filed with the court at least 30 days prior to trial. Finally, the COA notes that TRCP 308b governs questions regarding the enforceability of foreign judgments asserted in cases brought under the Family Code. This entails the party seeking enforcement to provide notice to the other party within 60 days of the original filing allowing them to object and then requires the court to conduct a hearing at least 30 days prior to trial to determine whether the foreign judgment will be enforced. Clearly none of those procedures were followed in this case. Here the trial court was never aware of the Mexican divorce at any time before trial or rendition. Even then, when a plea to the jurisdiction was filed before a decree was signed, it was never heard and post judgment filings were late. The COA ultimately holds that H’s failure to adhere to all of the procedural requirements of TRCP 308b that his arguments concerning lack of subject matter jurisdiction must fail. Judgment affirmed. COMMENT: An order issued without subject matter jurisdiction is void. Void orders can be attacked at any time, even collaterally. Case law says a COA can take judicial notice for the first time on appeal. (878 SW2 498) H asked the COA to take judicial notice of the Mexican divorce and supplied all the information. The Opinion does not state whether notice was taken, but instead relies on procedural defects to make an affirmative finding that the trial court had subject matter jurisdiction at the time of the divorce hearing. Just because the trial court was unaware of the Mexican divorce at the time of trial and subsequent deadlines to address this issue were missed does not in my mind translate to subject matter jurisdiction. Either it existed or it did not. If W wanted to dispute the validity of the Mexican divorce then it seems she could have done so when H asked the COA to take judicial notice of it. The Opinion does not mention any opposition to the request. I am not convinced that the COA got this one right.