What happens when a spouse contributes or loans separate property to the community estate during marriage, then seeks reimbursement of those contributions/loans at divorce?

The recent case of Hinton v. Burns out of the Dallas Court of Appeals sheds light on how this is handled. In Hinton, Husband and Wife both brought separate property assets into the marriage.  Husband had a separate property business and inheritance, and Wife had a separate property residence.  During the marriage, Husband contributed all of his inheritance to the community estate and it was spent on community expenses.  Additionally, Husband’s separate property business made a loan to the community estate. Husband sought reimbursement to his separate property estate from the community estate during the divorce for these contributions. Meanwhile, during the divorce, Wife moved into her separate property residence and established it as her homestead. This residence was confirmed as her separate property during the divorce.

The trial judge found in favor of Husband in his reimbursement claims and awarded judgment in favor of the separate estate and against the community estate for the reimbursement claim.  The trial judge then split the reimbursement judgment in half and ordered half of the claim to be borne by Wife in the division of the marital estate.  Unfortunately, the trial judge also ordered that the judgment be secured against "all of Wife’s property" including her separate property homestead residence.

Wife appealed, complaining that the trial court erred by imposing the lien against her separate property, and especially against her homestead.  

The Dallas Court of Appeals agreed with Wife for two reasons.  First, Wife’s separate estate did not benefit from the contributions made by Husband’s separate estate to the community estate so a lien against Wife’s separate estate was improper.  Texas Family Code Section 3.406(a) provides that “[o]n dissolution of a marriage, the court may impose an equitable lien on the property of a benefited marital estate to secure a claim for reimbursement against that property by a contributing marital estate.” Thus, the lien was only proper against the community estate which benefited, and not against the Wife’s separate estate. Second, the Texas Constitution prohibits imposing a lien against a homestead except under certain, limited circumstances.  This situation failed to come within the exceptions and so the lien was constitutionally prohibited. Thus, the only lien permissible here was the lien imposed against Wife’s portion of the community estate. 

 

Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Michelle O'Neil Michelle O'Neil

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes…

Michelle May O’Neil has 27 years’ experience representing small business owners, professionals, and individuals in litigation related to family law matters such as divorce, child custody, and complex property division. Described by one lawyer as “a lethal combination of sweet-and-salty”, Ms. O’Neil exudes genuine compassion for her client’s difficulties, yet she can be relentless when in pursuit of a client’s goals. One judge said of Ms. O’Neil, “She cannot be out-gunned, out-briefed, or out-lawyered!”

Family Law Specialist

Ms. O’Neil became a board-certified family law specialist by the Texas Board of Legal Specialization in 1997 and has maintained her certification since that time. While representing clients in litigation before the trial court is an important part of her practice, Ms. O’Neil also handles appellate matters in the trial court, courts of appeals and Texas Supreme Court. Lawyers frequently consult with Ms. O’Neil on their litigation cases about specialized legal issues requiring particularized attention both at the trial court and appellate levels. This gives her a unique perspective and depth of perception that benefits both her litigation and appellate clients.

Top Lawyers in Texas and America

Ms. O’Neil has been named to the list of Texas SuperLawyers for many years, 2011-2018, a peer-voted honor given to only about 5% of the lawyers in the state of Texas. In 2014-2018, Ms. O’Neil received the special honor of being named by Texas SuperLawyers as one of the Top 50 Women Lawyers in Texas, Top 100 Lawyers in Texas, and Top 100 Lawyers in DFW. She was named one of the Best Lawyers in America for 2016 and received an “A-V” peer review rating by Martindale-Hubbell Legal Directories for the highest quality legal ability and ethical standards.

Author and Speaker

A noted author, Ms. O’Neil released her second book Basics of Texas Divorce Law in November 2010, with a second edition released in 2013, and a third edition expected in 2015.  Her first book, All About Texas Law and Kids, was published in September 2009 by Texas Lawyer Press. In 2012, Ms. O’Neil co-authored the booklets What You Need To Know About Common Law Marriage In Texas and Social Study Evaluations.  The State Bar of Texas and other providers of continuing education for attorneys frequently enlist Ms. O’Neil to provide instruction to attorneys on topics of her expertise in the family law arena.