The CFL course taught you the most practical ways to divide property in divorce settlements to avoid lengthy battles. Sometimes errors occur along the way, so an agreement that irons out every wrinkle will prevent confusion later. The recent Texas appeals court case of Garcia vs. Ruiz is an example of how property division mistakes can cause headaches.
Cynthia Ann Garcia and Vicente Ruiz, Jr. were married in 2000. Fifteen years later, Cynthia filed for divorce on the ground that the marriage had become insupportable and the couple couldn’t reconcile. They got joint custody of their children and divided the marital estate.
Ms. Garcia appealed, arguing that the trial court erred by (1) failing to include the lease of a ranch Vicente used recreationally as part of the community estate and (2) unfairly allocating more than $430,000 he owed to the Internal Revenue Service (IRS) for unpaid taxes from his roofing business income. In allocating all of the tax debt to him, Cynthia Ann asserted that the trial court mistakenly used it to offset the value of the community property assets awarded to Vicente as part of a fair and equitable property division.
Vicente had entered into a written lease agreement to rent the 32-acre ranch from a friend in 2011. The owner testified that he would extend the lease indefinitely – beyond the ten-year term – as long as Vicente paid the rent. He also said he was willing to sell the ranch to Vicente for a significant discount. Cynthia Ann contended at trial that evidence showed Vicente actually owned the ranch, but he hid his ownership interest from the IRS by claiming he was renting it.
As for the roofing business, Mr. Ruiz founded it before the marriage, and later added Cynthia Ann’s name to it. After three years, she filed to abandon any record of her ownership interest in the company and filed separate tax returns because she didn’t like the way the business was run.
The trial court found no evidence to confirm that the ranch was part of the marital estate and denied Cynthia Ann’s request to divide the property.
She appealed, asserting that the trial court erred in failing to include the ranch lease in the division of the marital estate. She didn’t offer evidence of Vicente’s ranch ownership.
Texas Court of Appeals Decision
The appeals court ruled that the trial court abused its discretion in finding the lease wasn’t community property, as it was executed during the marriage and extended through the divorce.
It also noted that the trial court didn’t assign a value to the lease. There was proof that Vicente paid rent, but nothing showed the amount he paid represented the actual lease value or if his friend had given him a discount. Essentially, there wasn’t enough evidence to reveal that the lease was a community asset, a community debt, or if it had little effect on the property division. Without evidence of the lease’s value, the trial court couldn’t perform a “just and right” property division.
The appellate court reversed the property division. It ruled that the trial court erred in disregarding the undisputed evidence that Vicente entered an agreement to lease a ranch during the marriage.
As stated in the ruling, “When a trial court commits error in dividing property in a divorce, a court of appeals is not permitted to render a different division or to remand only certain portions of the marital property for a new division; rather, the reviewing court must remand the entire marital estate for a new division. Therefore, we reverse in its entirety the property division and remand for further proceedings consistent with this opinion.
Because we are reversing and remanding for a new property division, it is unnecessary to reach the other appealed issue in this case concerning Ruiz’s tax liability.”
Our Certified Financial Litigators course teaches you the secrets of dividing property effectively. Find out why it’s not who you know, but what you know that helps you get ahead in our free information packet today.
Cases.justia.com. (2019). [online] Available at: https://cases.justia.com/texas/first-court-of-appeals/2019-01-17-00969-cv.pdf?ts=1560255328 [Accessed 27 Sep. 2019].