Sallee S. Smyth

  1. In the Interest of D.N.P., 2021 Tex. App. LEXIS 1528 (Tex. App. – Dallas March 2, 2021) (mem. op.) (Cause No. 05-19-01083-CV)

M and F entered into an MSA in 2012 which included terms for F to pay periodic monthly child support as well as terms providing that F would pay, as additional child support, 30% of his net annual bonus for years 2013 and 2014 to M and thereafter 25% of his net amount bonus for the balance of the period in which F owed a duty of support for the parties two younger children. The MSA stated time periods for these additional payments and required H to provide documentation to W in the form of his paystubs for year end as well as the month in which he received any such bonus. The terms of the MSA were incorporated into a final decree. In 2019 M filed a motion for enforcement alleging that F had made none of the “additional” child support payments. M requested a finding of contempt, confirmation of arrearages and clarification if the existing decree terms were not sufficiently specific. The trial court held a hearing for three days between April and August. M testified that F had made no additional child support payments. F agreed but argued that he was not obligated to because in his 30 years of employment, he has never received a “bonus.” Instead, F stated that he received an annual distribution from his employer’s profit-sharing plan in addition to his salary. The trial court clarified the decree to reflect the intent of the parties as gleaned from their testimony, that being the parties intent that F should pay M a % of the annual payments he received from his employer beyond his salary, whether called a bonus or a distribution of profits. The trial court found arrearages of almost $16,000 plus approximately $2600 in accrued interest. F appealed, arguing that the decree was clear and did not require clarification and further that the terms bonus and profit sharing are not interchangeable and did not mean the same thing when terms of the entire decree were considered. The COA reasoned that because F held the same job at all times during the marriage and for the years following divorce, when he entered into the MSA he agreed to make payments of additional child support to M based on a % of annual payments he received from that job over and above his salary regardless of what they were specifically called. The term bonus could not have been intended to mean anything other than those annual payments F had always received even if they were a profit-sharing distribution. Interpreting the MSA and decree in accordance with F’s argument would have rendered the terms meaningless. As such, the COA holds that clarification was warranted and the amount of arrearages were properly confirmed.

  1. In re Durham, 2021 Tex. App. LEXIS 1578 (Tex. App. – Waco March 3, 2021) (mem. op.) (Cause No. 10-19-00199-CV)

W filed for divorce in 2018 and H was properly served with citation. H did not file an answer and the trial court granted a default divorce on February 7, 2019. H did not receive notice of the final decree. On April 8, 2019 H filed a sworn motion for extension of the deadlines per TRCP 306a, stating that although he was told about the divorce on March 17, he did not receive actual notice of the decree until March 18. The trial court conducted a hearing and granted the motion, determining that H’s post judgment deadlines begin to run on March 18. H filed a MNT on April 17 which the trial court denied after an oral hearing. H filed his notice of appeal on June 13. W initially argued that the COA had no jurisdiction because H admitted he learned about the divorce on March 17, making his post judgment filing and subsequent appeal late. The COA examined the record and found no abuse of discretion in the trial court’s decision to base it’s 306a ruling on the date H received actual notice of the final judgment. As to the division of property in the default decree, H complained that there was no evidence supporting the value of the community estate and the existing disproportionate division was not just and right. The underlying trial record, including the court’s ruling was 8 pages long. Within that 8 pages, W testified as to the existence of various vehicles, a business interest, a house and personal property in the possession of each party, and claimed certain items to be her separate property. At no time however did W offer testimony as to the value of any of these assets, gave no evidence on the amount of existing liabilities, gave no testimony on the overall value of the community estate and offered no testimony supporting her claim that the division she sought was just and right. The COA concluded that the trial court has no evidence upon which to base its own assessment of a just and right division, therefore abused its discretion in dividing the estate. Divorce affirmed, division of property reversed and remanded. COMMENT: This decision serves to remind us that proving up a default still requires some preparation, some effort and by all means some evidence!!!

  1. In re Marriage of A.W.E., 2021 Tex. App. LEXIS 1646 (Tex. App. – Dallas March 4, 2021) (mem. op.) (Cause No. 05-19-01303-CV)

After college, H created a real estate company (the Company). W came to work for the Company and the parties married in 1986. They worked together to build the business over the years and several subsidiary companies were created. They amassed a sizeable estate. Prior to 2008 the Company was H’s separate property but he executed a post nuptial agreement (PNA) converting the Company to community property and he and W each held 50% of the shares. The success of the Company was due to four key employees. While the Company was H’s s/p, he entered into an agreement that would pay these individuals bonuses each year that totaled 25% of the Company’s net cash profits. He also agreed that if the majority of Company stock ever passed to someone other then himself, W or their descendants, these individuals would also receive a “change of control” bonus totaling 25% of the net cash proceeds from this transfer. The parties’ PNA also included terms for valuing and dividing the community estate in the event of a divorce and provided that H and W would each receive 50% of the net community estate in that event, being the value of all assets less outstanding liabilities at the time of divorce. The PNA stated that if they could not agree upon the value of an asset, then they would each have it valued and if the appraisals were less than 10% of one another, then the value would be the average of the two. However, if the difference was more than 10%, the PNA provided that a third appraiser would be selected by the other two appraisers and this third appraisal would be averaged with the prior appraisal closest to it and that average would be the FMV used for the asset. W filed for divorce in May 2018 and the parties could not agree on the value of the Company. They hired appraisers who would value the Company as of 12/31/18. Appraisals were delivered in February 2019 with W’s appraiser determining a value of $72MM and H’s appraiser offering a value of $30.5MM. Since the difference was more than 10%, a third appraiser was selected and his value was $50.5MM. Because the third appraisal was closer to that of H’s appraisal, these amounts were averaged per the PNA to result in a Company value of $40.5MM. However, W’s appraiser then issued a new report, changing her value from $72MM to $65MM, bringing her appraisal closer to the third appraiser and when averaged this created a Company value of $58MM ($18MM more than the other one). H asked the court to exclude this final appraisal. At trial W testified that she did not want the Company, but she wanted it awarded to H and she wanted to receive her share of the asset in the form of other property totaling 50% of the Company value. H testified that he was more than happy to receive the Company if the court valued it at $20MM or less. The parties did agree that their existing homes should be sold (one worth $10MM and the other worth $4MM) and the proceeds divided equally between them. At the conclusion of trial, the Court issued its decision awarding H and W both 50% of the shares in the Company and then ordering the Company sold, providing for terms of sale and accounting for the “change of control” bonuses due to the key employees. The trial court also meticulously calculated a 50/50 division of the parties’ remaining community estate (down to the penny), which estate was valued in excess of $90MM not including the Company shares! The COA eventually recognized that the trial court took its time to honor the terms of the PNA. The trial court ultimately signed a final decree and W appealed. H filed a motion to dismiss the appeal claiming W had accepted benefits by taking possession of certain furniture, by bringing a motion to enforce the decree for H’s alleged misuse of funds from an account designated for paying expenses relating to their residences, and for invoking the decree and PNA to argue that a shareholder voting agreement was no longer valid. The COA analyzed each of these claims to determine if H was prejudiced by W’s conduct. The COA found that the enforcement motion did not affect any property which was the subject of W’s appeal and further W’s removal of furniture from her residence contrary to terms of the decree likewise did not affect any issue on appeal. The COA further found that H did not establish any prejudice regarding W’s conduct concerning the voting rights agreement. As such, H was not entitled to a dismissal of W’s appeal on the merits based on acceptance of benefits. On appeal from the property division, W argued primarily that the PNA did not permit the trial court to issue an order requiring a sale of the Company. The COA disagreed, finding that the parties had agreed to the sale of other assets (their residences) and as such, it was clear that the parties did not believe that the PNA prohibited it. Further, the COA noted that while H early on in the case did not want the Company sold, by the time of trial he agreed that this was the best outcome for both parties. The COA further discussed the many issues with the various appraisals of the Company, including the different formulas used, the appraisers’ disagreement on what size company provided the best comparison values and how to discount personal goodwill. The court also heard testimony that the sales price for the Company would likely be substantially less than its appraised value. The COA reasoned that since both parties testified that they did not want the

Company to be awarded to them, the trial court could easily have decided that if it did award all shares to one spouse, they would likely sell them. In this circumstance, the COA recognized (as did the trial court) that placing a value on the Company and awarding it to one spouse, while awarding an equal value of assets to the other spouse, could ultimately result in a inequitable division if the Company sold for a substantially reduced value. The trial court specified in its rendition that because of the enormous discrepancy in the value of the Company, the shares should be sold. The COA finds that trial court’s have authority to order the sale of assets which cannot be partitioned in kind. Here, because neither party wanted the Company, this supported the trial court’s order for sale of the stock. W complained that the trial court did not put a value on the sales price for the stock in accordance with the appraisals, however since the court ordered it sold to the highest bidder following a procedure set out in the decree, the COA found these terms to be equitable. W complained that the sale of the Company resulted in the parties’ receiving less value because the sale required the payout of “change of control” bonuses and taxes. However, the COA noted that if awarded to one spouse, the order would have required the court to give exclusive control to that spouse, having them shoulder the entire burden of these payments. Again, since neither spouse wanted the shares, sale of the stock was the most just and right decision. W also challenged the court’s disproportionate award of certain brokerage accounts to H, but the COA again determined that the PNA provided for a 50/50 division of the net value of the community estate and here the trial court awarded some assets to H and some to W in order to achieve that result so there was no error in disproportionately dividing particular assets. W also challenged the trial courts order assessing third party attorneys fees against her. These were fees incurred by subsidiaries of the Company. The COA found the order proper because W was the one who sued the third party and they brought their counter claim against W only. After sorting through and analyzing several other minor issues the COA found no error and the judgment was affirmed.

  1. In re Sondoval, 2021 Tex. LEXIS 207 (Tex. Supreme Court March 12, 2021) (Cause No. 19-1032)

In March 2016 W filed suit for divorce. Claiming her H could not be found, she filed a motion for alternative service under TRCP 106(b). The trial court granted the motion, permitting alternative service upon H at his mother’s residence in Fort Worth. A return receipt shows service on H’s mother on October 6, 2016. A no answer default judgment was taken on January 6, 2017 and the decree awarded W the FW home where H’s mother lived. On January 30, 2017, H filed a motion for new trial which attached his affidavit certified by a notary in Mexico as well as unsworn declarations from his siter and his mother. H’s affidavit stated that he had lived in Mexico since being deported in 2012 and that W had visited him at his address. He further stated that the parties’ child was conceived there. He claimed that he did not oppose W obtaining a divorce or a decree obligating him to pay child support but he had no idea his W was seeking the FW residence. H claimed that the FW residence was not a community asset and that he and his sister had purchased the house two years before he married, attaching copies of his loan application to the affidavit. His sister’s declaration corroborated his story providing that they purchased the house in their name because their mother’s credit was bad, but their mother provided the down payment and made all payments on the loan. In the trial court, W objected to the court considering H’s affidavit and the two declarations based on hearsay objections, which the trial court sustained and denied the MNT. The COA affirmed the default, not based on the hearsay objection, but determining that because H provided no translation of the Mexican notary certification, his affidavit was defective and could not be used to substitute as sworn testimony in support of the Craddock factors for obtaining a new trial. The COA further found that the mother and sister’s unsworn declarations contained conclusory allegations without underlying factual support and likewise could not be considered as evidence supporting a new trial. Upon review by the Supreme Court, they find that uncontroverted facts within a supporting affidavit that are based on personal knowledge are not hearsay and the trial court erred in sustaining that objection. Further, the COA erred in deciding the case on the basis that they found other defects in the affidavit (i.e. the Spanish certification not being translated). The S.Ct. notes that when a notary is done in a foreign language the affiant should provide a translation, which combined constitute a “jurat.” However, when an affidavit has a defective jurat, the party opposing the document must object to the defect so the party has an opportunity to correct it. This defect is one of form not substance and must be objected to in the trial court or it is waived. As such, the COA erred when it affirmed the default based on an error that had not been preserved by the W in the trial court (as W did not complain about the absent translation). The S.Ct. found that H’s affidavit provided a reasonable basis for his failure to appear or answer, because he did not disagree with the divorce proceedings, but he was reasonably unaware that the court could award his separate property house to W. The S.Ct. otherwise found H’s MNT and affidavit sufficient to establish his entitlement to a new trial and W offered no evidence of harm if the new trial had been granted. COA judgment reversed and the matter is remanded to the trial court for further proceedings. COMMENT: Note that the final judgment was reversed in its entirety (both divorce and property division) such that parties who thought they were divorced in January 2017 continue to be married as of the S.Ct.’s March 2021 Opinion. Once again, being prepared to present a default in the correct manner and understanding the rules which do and do not apply can save parties a lot of time and a lot of money, not to mention saving another 4 years being added to their marriage and a community estate which therefore continued to accrue!

  1. In the Interest of T.D.L., 2021 Tex. App. LEXIS 1978 (Tex. App. – San Antonio March 17, 2021) (Cause No. 04-20-00274-CV)

A child, TDL, was born to F and M in 2014. Between 2014 and 2020 the couple resided with the child in various places, including a house in Alice, TX, an apartment in Austin where M worked and with Paternal GM (PGM) at her residence in Wilson County. Evidence established that from 2017 to 2019 the child attended day care and then school in Wilson County and from August 2019 to January 2020, F, M and the child lived in a bedroom in PGM’s home. In January 2020 F died while he, M and the child were in Austin. M and the child moved in with her parents in Erath County where M enrolled the child in school. In February 2020 PGM filed an original SAPCR in Wilson County requesting appointment as SMC. She alleged standing based on TFC 102.004(b) (appointment of parent would significantly impair the child’s physical health or emotional development). PGM attached and incorporated by reference an affidavit that described the length of time the child had lived in her home since birth and all of her contributions to caring for and raising the child, some of which took place while the parents were away and some while they were also living in the home. PGM sought and obtained a writ of attachment and the child was removed from his school in Erath County and delivered to PGM. M filed a plea to the jurisdiction challenging PGM’s standing and requested a transfer of the case from Wilson County to Erath County. The trial court held an evidentiary hearing and heard from 14 witnesses. M objected to the court considering standing under TFC 102.003(a)(9) (care and control for at least 6 months) because PGM did not include this as a basis for standing within her pleadings. At the conclusion of the hearing the trial court found that PGM did not meet her burden to establish standing under either TFC 102.004(b) or 102.003(a)(9), granted the plea to the jurisdiction and dismissed PGM’s suit entirely. PGM appealed. The COA first holds that PGM’s pleadings were sufficient to allow consideration of her standing under TFC 102.003(a)(9) because her affidavit contained factual recitations that met all elements of the statute, including residence in PGM’s home for the requisite 6 months and the care, custody and control that PGM provided to the child during that period of time. This put M on fair notice of the facts upon which PGM was basing her standing claims. Further, the COA reviewed all of the jurisdictional evidence and determined that it rose to the level of creating a fact issue which precludes the court from dismissing on jurisdictional grounds. M attempted to rely on the trial court’s finding that PGM’s testimony was not credible, however, the COA points out that PGM needed only to create a fact issue (much like summary judgment standards) and that credibility determinations at the jurisdictional phase of the case are premature. Instead, conflicts in the evidence were to be decided in PGM’s favor. Pointing out that standing does not address whether PGM should prevail, but only that she has a right to pursue relief, the COA reverses the trial court’s order dismissing the case and remands the matter back for further proceedings.

BEFORE WE GO: Last month I reported on Maraio-Wilhoit v. Wilhoit, 2021 Tex. App. LEXIS 888 (Tex. App. – Eastland February 4, 2021) (mem. op.) (Cause No. 11-18-00312-CV) which held that TFC Chp. 201 terms govern associate judges presiding in Title 5 cases only and that Tex. Govt. Code §54A.101-118 governs situations where associate judges are presiding in cases under Title 1. Astutely, the Hon. Janice Berg, 247th Family District Court in Harris County, pointed out to me the flaw in this line of thinking. Specifically, Tex. Fam. Code §201.001(a) provides that a presiding judge with jurisdiction over Title 1, Chapter 45, Title 4 and Title 5 can appoint an associate judge when authorized by their county and further Tex. Fam. Code 201.005(a) can refer cases under any of those same designations to an associate judge for handling. Good catch, Judge Berg. It seems that the Eastland Court may have gotten this one wrong so make note.