Court of Appeals of Texas, Second District, Fort Worth
Jessey Chi Hua Lee; JoAnderson Capital, LLC.; Jim K. Lee; and Chen L. "Jenny" Lee, Appellants
Crystal Linh Hoang Lee, Appellee
Appeal from the 367th District Court Denton County, Texas
Trial Court No. 15-04017-367
Sudderth, C.J.; Gabriel and Birdwell, JJ.
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.
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
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.
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.
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.
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.
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.
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.
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
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.
STANDARD OF REVIEW
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.
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.
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).
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.
CHARACTERIZATION OF INTEREST IN JOANDERSON CAPITAL
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.
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
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
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.
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).
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.
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.
begin our sufficiency review with a summary of the evidence
relevant to the characterization of, and ...