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Dyer v. Dyer

Court of Appeals of Texas, Third District, Austin

June 15, 2018

Donald Edmund Dyer, Appellant
Estela Trevino Dyer, Appellee


          Before Justices Puryear, Field, and Bourland



         Following an agreement between the parties to bifurcate the case between jury and bench trial, the trial court signed a divorce decree dividing the community estate of appellant Donald Edmund Dyer and appellee Estela Trevino Dyer, giving Estela a majority of the community estate and ordering Donald to reimburse the community estate for certain expenditures.[1] On appeal, Donald argues that the evidence does not support the disproportionate division of the estate or some of the grounds for reimbursement. We reverse the portions of the decree dividing the estate and remand the case to the trial court to make a new division of property pursuant to this opinion.

         Standard of Review

         A trial court must "order a division of the estate of the parties in a manner that the court deems just and right, " Tex. Fam. Code § 7.001, and has broad discretion in making that division, Penick v. Penick, 783 S.W.2d 194, 198 (Tex. 1988); O'Carolan v. Hopper, 71 S.W.3d 529, 532 (Tex. App.-Austin 2002, no pet.). The trial court does not have to divide the community property equally, but the division must be equitable and the record must reflect a reasonable basis for an unequal division of the property. O'Carolan, 71 S.W.3d at 532. "To constitute an abuse of discretion, the property division must be manifestly unfair." Id. (citing Mann v. Mann, 607 S.W.2d 243, 245 (Tex. 1980)).

         In exercising its discretion, the court may consider factors such as the parties' "earning capacities, education, business opportunities, physical condition, financial condition, age, size of separate estates, nature of the property, and the benefits that the spouse who did not cause the breakup of the marriage would have enjoyed had the marriage continued." Id. The trial court has the opportunity to observe the parties and other witnesses, determine credibility, and evaluate the parties' needs and potentials. Murff v. Murff, 615 S.W.2d 696, 700 (Tex. 1981). "Mathematical precision in dividing property in a divorce is usually not possible. Wide latitude and discretion rests in these trial courts and that discretion should only be disturbed in the case of clear abuse." Id. Although challenges to the legal and factual sufficiency of the evidence are not independent grounds of error, they are relevant factors when determining whether the trial court abused its discretion. O'Carolan, 71 S.W.3d at 532.

         We also review a trial court's determination of a claim for reimbursement for an abuse of discretion. Penick, 783 S.W.2d at 198. We begin our review by presuming that the trial court exercised its "wide latitude and discretion" properly. See Vallone v. Vallone, 644 S.W.2d 455, 459-60 (Tex. 1982). Reimbursement claims are governed by equitable principles, Tex. Fam. Code § 7.007, and the trial court may not order reimbursement from a spouse's separate property solely to secure a just and right division of the community estate, Heggen v. Pemelton, 836 S.W.2d 145, 146 (Tex. 1992). The party seeking reimbursement has the burden of establishing the community estate's right to it. Jensen v. Jensen, 665 S.W.2d 107, 110 (Tex. 1984). However, the "payment by one marital estate of the debt of another creates a prima facie right of reimbursement, " which is considered in light of offsetting benefits to the contributing estate. Penick, 783 S.W.2d at 196-98. "[I]t is well settled that a trial court may award a money judgment to one spouse against the other in order to achieve an equitable division of the community estate, " but only "as a means for the wronged spouse to recoup the value of his or her share of the community estate lost through the wrongdoer spouse's actions." Schlueter v. Schlueter, 975 S.W.2d 584, 588 (Tex. 1998).

         Factual Summary[2]

         Estela and Donald started dating in August 2007, married in June 2010, and separated in September 2014. Estela filed for divorce in October 2014. At the time the parties started dating, Donald had already built several successful companies and was wealthy.[3] Estela was a single mother of three sons, was working two jobs, owned a house, and had a small retirement account. Her sons were attending a private high school, relying on financial aid and relatives to pay the tuition. Donald and his first wife divorced in 2008, and they shared custody of their youngest son, J.D., who was about nine. Donald bought Estela a car in 2008, encouraged her to quit her job, and started giving her about $4, 000 per month. Donald testified that he did so because he wanted her to be able to spend more time helping her aging parents and so that he and Estela could spend more time together. Estela testified that he wanted her to quit her job so that she could travel with him, spend more time with him and J.D., and help entertain his business clients and their wives.

         After the parties married, Donald initially gave Estela some credit cards but about a year later "decided that was not going to work, " and started giving her a $10, 000 monthly allowance. Estela testified that "the longer we were married, the more controlling he became" and that midway into the marriage, "it almost seemed like he would give me money depending on my behavior. If I was good and behaved, he would give me money. If not, if I displeased him, he wouldn't."

         Estela's sons lost their financial aid when Estela and Donald married, and although Donald paid "some tuition" for her sons' private school, he did not pay for all of it, and Estela testified that Donald got angry when she used her allowance to pay for her sons' school tuition. Instead, Estela testified that with Donald's encouragement, she cashed in her retirement account and sold her house, although not for a large sum, and used those funds to pay her sons' tuition. Estela testified that her ex-husband paid some of the boys' educational expenses but not all that he had agreed to pay; she explained that her ex-husband, the father of her three sons, had several ailments and was not reliable. She also testified that one of her sons received a scholarship for some of his expenses and took out a student loan for the rest. Another son took a year off from school to work and save money "so as not to create any more stress between" Donald and Estela's ex-husband.

         Donald testified that he and Estela's ex-husband originally agreed that they would each pay half of the boys' educational expenses but that the ex-husband did not follow through on his obligations, meaning that Donald had to pay for all of Estela's youngest son's high school education. He testified that he agreed to pay for a state-school college education but that Estela wanted her sons to go to private universities. Donald said he refused to pay more for their educations than he had for his own children and told them he would "not pay a penny more than whatever it says you can get an education at" the University of Texas. Donald agreed that he had refused to allow Estela to use her allowance to pay for her sons' tuition but testified that during the marriage, he paid approximately $300, 000 toward Estela's sons' educations.

         Estela testified that in late 2013, after many fights in which Donald "kept saying it was his money and saying [she] married him for his money, " she took a part-time job to help pay for her sons' tuition, and that she quit when Donald threatened to divorce her, telling her by text that she was locked out of their bedroom and that she should sleep in another room that night. Donald stated that he was upset when she took the job only because it disrupted the family's holiday vacation plans and that he would have been fine with her working otherwise. Estela also testified that Donald once got angry at her while they were in Colorado and locked her out of the house, leaving her to sleep in the cold on the front porch; Donald denied that the incident had taken place.

         Donald testified that he controlled the bank accounts and credit cards and never added Estela to the accounts or opened any joint accounts. Both Estela and Donald called certified public accountants to testify. Estela's expert, William Bradley, explained that Donald's companies were "flow-through entities, meaning they don't pay any income taxes. They go on to the individual shareholder or partners' tax returns, and so the tax liability is paid at the individual level. So these entities don't pay taxes; the individual does." Companies with this tax structure are called "S corporations." See 26 U.S.C. § 1361 ("S corporation defined"). As explained by a federal tax court, "An S corporation is not subject to Federal income tax at the entity level. Instead, an S corporation's items of income, gain, loss, deduction, and credit-whether or not distributed-flow through to the shareholders, who must report their pro rata shares of such items on their individual income tax returns for the shareholder taxable year within which the S corporation's taxable year ends." Kumar v. Commissioner of Internal Revenue, 106 T.C.M. (CCH) 109, at *2, 2013 WL 4080998 (U.S.T.C. 2013). Thus, the tax liability of such a company is a liability of a married shareholder's community estate, regardless of whether the company's earnings are distributed to the shareholder or retained in the company-referred to as "retained earnings."

         Donald testified that he earned approximately $21 million pre-tax, about $13.5 million after tax, during his marriage to Estela. However, he said that although he paid taxes on the full amount, not all of that money went "into my personal checking account, " and that the $21 million was "income that was from my tax estate. That was not income I actually received." Donald testified that he decided how much to distribute to the community estate and how much to retain in the company and agreed when asked whether he had "started leaving more and more money in" his separate businesses since Estela filed for divorce. Although Donald did not provide any detail about how much he had increased his retained earnings after Estela filed for divorce, he introduced into evidence an expert report prepared by his CPA witness, Steve Pena. In that report, Pena stated that from 2011 through 2013, Donald's adjusted gross income ranged from about $3 million to $3.4 million, his "non-distributed income" ranged from about $112, 000 to $184, 000, and his taxes ranged from about $1 million to $1.3 million, resulting in almost $2 million in cash each year ...

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