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Lee v. Lee

Court of Appeals of Texas, Second District, Fort Worth

July 11, 2019

Jessey Chi Hua Lee; JoAnderson Capital, LLC.; Jim K. Lee; and Chen L. "Jenny" Lee, Appellants
v.
Crystal Linh Hoang Lee, Appellee

          On Appeal from the 367th District Court Denton County, Texas Trial Court No. 15-04017-367

          Before Sudderth, C.J.; Gabriel and Birdwell, JJ.

          MEMORANDUM OPINION

          LEE GABRIEL JUSTICE

         This is an appeal from the trial court's property division incident to the divorce of appellant Jessey Chi Hua Lee and appellee Crystal Linh Hoang Lee. We affirm in part and reverse and remand in part.

         I. BACKGROUND

         Jessey and Crystal married on June 18, 2011. Nearly four years later, Jessey filed a petition for divorce, and Crystal filed a counterpetition shortly thereafter. The case proceeded to a bench trial that commenced on May 31, 2016. This appeal concerns only the trial court's division of the marital property, so we confine our discussion of the facts accordingly.

         One of the main disputes between Jessey and Crystal concerning the division of marital property was whether an interest Jessey had obtained in a California limited liability company called JoAnderson Capital, LLC was community property or Jessey's separate property. According to Jessey, he and someone named Richard Huang had formed JoAnderson Capital on April 2, 2014, for the sole purpose of purchasing and holding a single asset-a beach house in California-which would serve as a rental property. Jessey stated that JoAnderson Capital acquired the California beach house on April 23, 2014. Pertinent to this appeal, it is undisputed that during the marriage, Crystal received $24, 341 in rental income from the California beach house.

         Jessey maintained that in forming JoAnderson Capital, he had obtained a forty percent interest in the company by making a capital contribution of just under $900, 000 and that Huang owned the remaining sixty percent interest. Jessey said that his parents, appellants Jim K. Lee and Chen L. "Jenny" Lee, eventually acquired Huang's sixty percent interest in JoAnderson Capital. Jessey further asserted that 99.5% of the funds he used to make his capital contribution came from money he had inherited from his grandparents, while the remaining 0.5% had come from funds belonging to the marital estate. Thus, Jessey claimed that 99.5% of a forty percent interest in JoAnderson Capital was his separate property and that only 0.5% of the forty percent interest was community property that was subject to division by the trial court.

         Crystal had a markedly different view. During their marriage, she and Jessey had formed LF Enterprises, LLC, a company that supplied furniture to residential furniture retailers around the world. She asserted that the money Jessey had used to acquire the interest in JoAnderson Capital had actually come from revenue generated from LF Enterprises and, thus, Jessey's interest in JoAnderson Capital belonged to the community estate. Crystal submitted an inventory in which she indicated that Jessey owned 100% of JoAnderson Capital when it was formed and that the entire company, which she valued at $2.25 million, belonged to the community estate.

         On August 1, 2016, the trial court emailed Jessey's and Crystal's counsel a letter ruling regarding the division of their marital property. In the letter ruling, the trial court stated it had decided to characterize the $24, 341 in rental payments Crystal had received as community property. The trial court also indicated that it had determined Jessey held a 50% interest in JoAnderson Capital and that it had found the interest was community property.

         On August 15, 2016, Jim, Jenny, and appellant JoAnderson Capital moved to intervene. They alleged that Jim and Jenny owned a 60% interest in JoAnderson Capital and that consequently, a decision by the trial court finding Jessey and Crystal's community estate held a 50% interest in JoAnderson Capital would improperly divest Jim and Jenny of 10% of their collective interest in the company. The intervenors also alleged that the $24, 341 in rental payments Crystal received was actually rental income that belonged to JoAnderson Capital and that consequently, the trial court's decision to find those funds belonged to Jessey and Crystal's community estate would improperly divest JoAnderson Capital of its business income.

         The trial court signed a final decree of divorce on August 30, 2016, in which it divided Jessey and Crystal's marital estate in accordance with its letter ruling. Three aspects of the trial court's property division are noteworthy here. First, the trial court found that the marital estate owned half of the overall value of JoAnderson Capital, determined that half of JoAnderson Capital's overall value was $1, 101, 578, and split that amount equally between Jessey and Crystal. Second, the trial court awarded Crystal the $24, 341 she had received from renting out the California beach house. And third, the trial court awarded Crystal a money judgment against Jessey in the amount of $600, 789 as "part of the division of community property between" them.

         Jessey and the intervenors filed motions for new trial, which the trial court granted. In its order granting Jessey's motion for new trial, the trial court set aside the property division it had made in the August 30, 2016 decree and ordered that it would "retry the characterization of JoAnderson Capital, LLC and redetermine the division of the marital and separate estates if needed." After conducting a new bench trial on that issue, the trial court signed a final decree of divorce on October 5, 2017, but did not change any part of the three above-noted areas of property division that it had made in the August 30, 2016 decree.

         Jessey and the intervenors requested findings of fact and conclusions of law, and the trial court filed its findings and conclusions on November 6, 2017. Jessey and the intervenors timely appealed, with Jessey raising five issues and the intervenors raising two.

         II. STANDARD OF REVIEW

         All of the issues in this appeal challenge the trial court's division of Jessey's and Crystal's marital estate incident to their divorce. A trial court is charged with dividing a marital estate in a "just and right" manner, considering the rights of both parties. Tex. Fam. Code Ann. § 7.001; Boyd v. Boyd, 131 S.W.3d 605, 610 (Tex. App.-Fort Worth 2004, no pet.). A trial court has wide discretion in dividing the marital estate upon divorce, and thus we will not disturb the trial court's division of the marital estate on appeal unless the complaining party demonstrates from evidence in the record that the division was so unjust and unfair as to constitute an abuse of discretion. Neyland v. Raymond, 324 S.W.3d 646, 649 (Tex. App.-Fort Worth 2010, no pet.). A trial court abuses its discretion if it acts without reference to any guiding rules or principles; in other words, a trial court abuses its discretion if it acts arbitrarily or unreasonably. See Boyd, 121 S.W.3d at 610.

         In reviewing a marital property division, the abuse of discretion standard of review overlaps with the traditional civil sufficiency standards of review; thus, legal and factual sufficiency are not independent grounds of error, but they are relevant factors in assessing whether the trial court abused its discretion. Neyland, 324 S.W.3d at 649. To determine whether there has been an abuse of discretion because the evidence is legally or factually insufficient to support the trial court's decision, we engage in a two-pronged inquiry: (1) did the trial court have sufficient evidence upon which to exercise its discretion, and (2) did the trial court err in its application of that discretion? Id. The applicable sufficiency review comes into play with regard to the first question. Id. at 649-50. We then proceed to determine whether, based on the elicited evidence, the trial court made a reasonable decision. Id. at 650.

         A trial court's findings of fact have the same force and dignity as a jury's answers to jury questions, and we review the legal and factual sufficiency of the evidence supporting those findings using the same standards that we apply to jury findings. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); see also MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 663 n.3 (Tex. 2009). When the appellate record contains a reporter's record, findings of fact on disputed issues are not conclusive and may be challenged for evidentiary sufficiency. Super Ventures, Inc. v. Chaudhry, 501 S.W.3d 121, 126 (Tex. App.-Fort Worth 2016, no pet.). We defer to unchallenged fact findings that are supported by some evidence. Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518, 523 (Tex. 2014).

         When the burden of proof at trial is by clear and convincing evidence, we apply a higher standard of legal and factual sufficiency review. Boyd, 131 S.W.3d at 611. When reviewing the evidence for legal sufficiency on such issues, we look at all the evidence in the light most favorable to the judgment to determine if the trier of fact could reasonably have formed a firm belief or conviction that the challenged finding was true. Horizon Health Corp. v. Acadia Healthcare Co., 520 S.W.3d 848, 866 (Tex. 2017). And when reviewing for factual sufficiency, we determine whether, on the entire record, a factfinder could reasonably form a firm conviction or belief that the challenged finding is true. In re H.R.M., 209 S.W.3d 105, 108 (Tex. 2006).

         III. CHARACTERIZATION OF INTEREST IN JOANDERSON CAPITAL

         The trial court made the following findings of fact related to the characterization of Jessey's interest in JoAnderson Capital and the percentage of his ownership:

8) The evidence presented to support Petitioners' and Intervenors' request to change the characterization of the JoAnderson property was self-serving and not credible.
9) The evidence presented did not show by clear and convincing evidence that JoAnderson Capital, LLC was a separate property entity, nor that the funding for JoAnderson was funded by separate property funds.
. . . .
12) At the new trial[] hearing the Court found that the Petitioner's evidence was not credible and . . . fail[ed] to prove by clear and convincing evidence that the JoAnderson's asset was funded by separate property or that it was owned with anyone other than Petitioner and a person named Huang.

         Additionally, the trial court found, "[b]ased on Jessey Chi Hua Lee's declaration of Richard Huang Yung Chang as his business partner, . . . [that] the community interest in JoAnderson Capital, LLC [was] 50% of the overall value of the company."

         The appellants challenge these findings. In his first and second issues, Jessey maintains the trial court's finding that he failed to meet his burden to establish the interest in JoAnderson Capital as his separate property is not supported by legally sufficient evidence, arguing that no evidence supports that finding and that the evidence conclusively established the contrary. In their first issue, JoAnderson Capital, Jim, and Jenny contend that the evidence is legally insufficient to support the trial court's finding that Jessey's interest in JoAnderson Capital was 50%, arguing that no evidence supports that finding and that the evidence conclusively proved Jessey held only a 40% interest in the company. They alternatively argue that the trial court's finding is not supported by factually sufficient evidence. Because all of these issues overlap, we consider them together.

         A. Applicable Law

         Under Texas law, property possessed by either spouse during or on dissolution of the marriage is presumed to be community property, absent clear and convincing evidence to the contrary. Tex. Fam. Code Ann. § 3.003. Clear and convincing evidence means the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established. Id. § 101.007. This intermediate standard of proof falls between the preponderance standard of proof that applies to most civil proceedings and the reasonable-doubt standard that applies to most criminal proceedings. In re G.M., 596 S.W.2d 846, 847 (Tex. 1980); State v. Addington, 588 S.W.2d 569, 570 (Tex. 1979). Clear and convincing evidence must outweigh evidence that would satisfy the preponderance standard, but it need not be unequivocal or undisputed. Addington, 588 S.W.2d at 570.

         The characterization of property as either community or separate is determined by the inception of title to the property. Boyd, 131 S.W.3d at 612. Inception of title occurs when a party first has a right of claim to the property by virtue of which title is finally vested. Id. Separate property includes "property acquired by the spouse during marriage by gift, devise, or descent." Tex. Fam. Code Ann. § 3.001(2).

         In order to overcome the community presumption, the burden is on the spouse claiming certain property as separate to trace and clearly identify the property claimed to be separate. Boyd, 131 S.W.3d at 612. The burden of tracing is a difficult, but not impossible, burden to sustain. Id. Tracing involves establishing the separate origin of the property through evidence showing the time and means by which the spouse originally obtained possession of the property. Id. Separate property will retain its character through a series of exchanges so long as the party asserting separate ownership can overcome the presumption of community property by tracing the assets on hand during the marriage back to property that, because of its time and manner of acquisition, is separate in character. Id. However, if the evidence shows that separate and community property have been so commingled as to defy resegregation and identification, the community presumption prevails. Id.

         When tracing separate property, it is not enough to show that separate funds could have been the source of a subsequent deposit of funds. Id. Moreover, as a general rule, mere testimony that property was purchased with separate funds, without any tracing of the funds, is insufficient to rebut the community presumption. Id. Any doubt as to the character of property should be resolved in favor of the community estate. Id.

         B. Evidence

         We begin our sufficiency review with a summary of the evidence relevant to the characterization of, and ...


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