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The recent Texas appeals case of Michelina v. Michelina involved undisclosed funds and showed that it’s necessary to have clear proof that community property should be separate. 

As a Matter of Facts

Robert and Monica Michelina signed a prenuptial agreement a few days before their 1994 marriage. After Monica filed for divorce in 2005, Robert counter-sued. Their split was finalized four years later.

After four prior cases that involved child custody, support, and property division, the fifth round focused mainly on whether the trial court committed reversible error by not enforcing the pre-nuptial agreement over a bank account and a $40,000 legal settlement. 

Court of Appeals 13th District of Texas Ruling

In his appeal, Robert argued that the prenup stated that “any property held in the individual name of either party to this agreement shall be presumed to be the separate property of that party.” He believed that included both assets.

As the appellate court noted, in their agreement, assets under the name of either spouse would be expected to be separate property. Further, per Texas family law codes, to establish proof of separate property, there must be “clear and convincing evidence” that shows a “firm belief or conviction as to the truth of the allegations.”

The appeals court also stated that “In general, testimony alone that property was purchased with separate funds, without any tracing of the funds, is insufficient to rebut the community presumption.”

Regarding the bank account in Robert’s name, the appeals court previously ruled that “there was more than a scintilla of evidence suggesting that community funds had been commingled.”

This came about through a series of checks Monica deposited; during the marriage, as bank statements showed and by his own testimony, Robert had also taken out a $40,000 loan and added the funds to the account. And, as the couple both testified, Robert had also deposited earnings from jobs he held during the marriage. Upon remand, the trial court concluded that the funds were community property subject to equal distribution. Robert had failed to provide “clear and convincing evidence that he could trace all of the deposits” into the bank account to separate funds. Based on findings in the record, the appeals court affirmed that decision, concluding that the trial court didn’t err in determining the account is community property.

On the issue of the $40,000 legal settlement and whether it should be community property, the appeals court pointed to Robert’s withholding of disclosure during the original divorce proceedings. As the trial court ruled at the time, “any undisclosed asset of the parties is awarded to the party not in possession or control of the asset.” Again, the appeals court sided with the trial court and found it was correct in its classification of it as community property.

Robert also rebutted the valuation of a Certificate of Deposit (CD) account awarded to Monica, which she testified that her former husband and mother-in-law opened with bank account funds. Robert didn’t disclose valuation information at the time of the divorce. The trial court had valued it based on his testimony in 2005. The appeals court ruled that the trial court had abused its discretion by failing to use valuation evidence closer to the date of divorce.

As for whether the trial court improperly awarded Monica all of the assets it found weren’t disclosed, the appeals court found no abuse of discretion.

Earning a CFL™ designation tells everyone that you know about financial matters in family law and are prepared to tackle complex cases. Learn more in our free information packet today.

Also, don’t forget to attend our online Judicial Panel event, Smart Alternatives in Handling Valuation Cases in a Cost-Effective and Meaningful Way: Strategies for Presentation to a Court – What is Really Required?

Thursday, Sept. 17th at 5:00 pm Eastern time / 4:00 pm Central time

For a $100 fee, you will receive exclusive access to a CLE-approved discussion among esteemed attorneys, judges, and experts to explore this strategically important issue.

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