v.
Michael Lawrence Shalit 'Cross-Appellant'
San Antonio, Texas
MEMORANDUM OPINION
No. 04-19-00736-CV
Robyn Lynn SHALIT, Appellant, Cross-Appellee v. Michael Lawrence SHALIT, Appellee, Cross-Appellant
From the 451st Judicial District Court, Kendall County, Texas Trial Court No. 11-177 Honorable Kirsten Cohoon, Judge Presiding
Opinion by: Patricia O. Alvarez, Justice
Sitting: Patricia O. Alvarez, Justice Luz Elena D. Chapa, Justice Irene Rios, Justice
Delivered and Filed: March 16, 2022
AFFIRMED IN PART, REVERSED IN PART, REMANDED
This is an appeal and a cross-appeal from a final decree of divorce. After a bench trial, the trial court divided the community property, and both parties complain about the division.
We affirm the parties’ divorce, but because the trial court’s mischaracterization of some of the community property was of sufficient magnitude to affect the just and right division, we reverse the trial court’s division of the community estate and its award of spousal maintenance.
04-19-00736-CV
We remand the cause to the trial court for a just and right division of the community estate based on the correct characterization of the property and a corresponding reevaluation of any award for spousal maintenance.
BACKGROUND
A. Relevant Facts
The community estate the trial court divided largely derived from the varied businesses of Cross-Appellant/Appellee Michael Lawrence Shalit and Appellant/Cross-Appellee Robyn Lynn
Shalit, including some real estate investments in New Jersey and Texas.
[*2]04-19-00736-CV 04-19-00736-CV
[*3]ROBYN’S FIRST ISSUE: PROPERTY DIVISION
Robyn argues that the trial court abused its discretion in dividing the community estate.
Specifically, in four subissues, she argues that the trial court abused its discretion when it did the following: (1) found the 61.23-acre and 4-acre tracts to be 62.5% community property—instead of 100% community property, (2) failed to properly divide the $1,924,000 Michael received from
the sale of the 61.23-acre tract, (3) failed to find that the $225,467 interest earned on the loan of the 61.23-acre tract’s sale proceeds was community property, and (4) failed to award Robyn her reimbursement claim of $202,604 for her contributions to BGS Realty.
Michael responds that the trial court acted within its discretion for the following reasons:
(1) BGS Realty owned the two tracts, the trial court found 62.5% of BGS Realty was community property, and thus the trial court’s finding that the two tracts were 62.5% community property is supported by sufficient evidence; (2) the limited and inconsistent evidence made it difficult to characterize the sale proceeds, but because BGS Realty owned the two tracts, the trial court did not abuse its discretion when it found that 62.5% of “any funds received from the sale of any property held by [BGS Realty]” would be community property; (3) the loan interest earned was derived from the sale proceeds, so the interest was also properly characterized as 62.5% community property; and (4) Robyn’s live pleading did not expressly identify her $202,604 reimbursement claim, and the trial court’s decision to not award Robyn’s claimed amount was within its discretion.
Before we address Robyn’s first issue, we briefly recite the standards of review and applicable law.
[*4]04-19-00736-CV
A. Standards of Review
“The test for abuse of discretion is whether the trial court acted without reference to any guiding rules or principles. . . .” Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990) (per curiam); accord Iliff v. Iliff, 339 S.W.3d 74, 78 (Tex. 2011).
“A trial court does not abuse its discretion if there is some evidence of a substantive and probative character to support the decision.” Roberts v. Roberts, 531 S.W.3d 224, 232 (Tex.
App.—San Antonio 2017, pet. denied) (quoting Garza v. Garza, 217 S.W.3d 538, 549 (Tex.
App.—San Antonio 2006, no pet.)).
But in the underlying sufficiency of the evidence review, if the evidence conclusively establishes the opposite of a trial court’s finding, the evidence supporting the finding is legally insufficient. See City of Keller v. Wilson, 168 S.W.3d 802, 814 (Tex. 2005) (noting factfinders
“are not free to reach a verdict contrary to [conclusive] evidence”); see also Regal Fin. Co., Ltd. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010).
And a finding based on legally insufficient evidence is an abuse of discretion. See Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998) (“It is an abuse of discretion for a trial court to rule . . . without supporting evidence.” (citations omitted)); Garza, 217 S.W.3d at 549.
B. Applicable Law
“Property possessed by either spouse during or on dissolution of marriage is presumed to be community property.” TEX. FAM. CODE ANN. § 3.003(a); accord Pearson v. Fillingim, 332
S.W.3d 361, 363 (Tex. 2011) (per curiam); Garza, 217 S.W.3d at 548. “The degree of proof necessary to establish that property is separate property is clear and convincing evidence.” TEX.
FAM. CODE ANN. § 3.003(b); accord Pearson, 332 S.W.3d at 363; Garza, 217 S.W.3d at 548.
“Parties claiming certain property as their separate property have the burden of rebutting the presumption of community property.” Pearson, 332 S.W.3d at 363 (citing McKinley v.
[*5]04-19-00736-CV
McKinley, 496 S.W.2d 540, 543 (Tex. 1973)). “[A]s 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.” Boyd v. Boyd, 131 S.W.3d 605, 612 (Tex. App.—Fort Worth 2004, no pet.) (citing Bahr v. Kohr, 980 S.W.2d 723, 728 (Tex. App.—San Antonio 1998, no pet.)).
C. Disputed Ownership of Two Tracts
In her first subissue, Robyn argues that the trial court erroneously found that BGS Realty, a partnership the trial court found to be 62.5% community property, owned the 61.23-acre and 4- acre tracts. Robyn insists that Michael’s personal DBA, Kimberly Investment Company—not
BGS Realty—purchased the two tracts at the foreclosure sale. Thus, she argues, her contention that BGS Realty did not own the two tracts and that the tracts are 100% community property is supported by conclusive evidence.
1. Evidence of Tracts Ownership
It is undisputed that the 61.23-acre and 4-acre tracts were owned by another entity before the two tracts were foreclosed, and the foreclosure occurred while Michael and Robyn were married. Michael’s sixth (and last) amended inventory shows the two tracts were “foreclosed on by Michael Shalit,” and it lists the two tracts’ ownership as 10% his children’s separate property and 90% as his (Michael’s) separate property.
[*6]04-19-00736-CV
Notably, at the beginning of the fourth day of trial, shortly before both sides rested, Robyn advised the court that “we have a matter that the parties agreed on, so before we start today[,] we would like to just get them into evidence to speed things up.”
Robyn continued: “[W]e’re going to try to use [our agreed documents] as a summary to try to facilitate the Court’s review of different critical issues in the case.” Robyn offered Petitioner’s
Exhibits No. 31 and 31-1, which contained standing orders in the case, and they were admitted without objection.
Next, Michael’s attorney offered Respondent’s Exhibit No. 35: “[W]e also have agreed about Respondent’s Exhibit No. 35.” Respondent’s Exhibit No. 35 (RX-35)—to which the parties agreed—was admitted without objection. RX-35 shows the two tracts as 100% community property.
[*7]04-19-00736-CV
94 S.W.3d 513, 519–20 (Tex. 2002))); see also McAllen Hosps., L.P. v. Lopez, 576 S.W.3d 389, 392 (Tex. 2019) (discussing legally insufficient evidence).
This conclusive evidence establishes the opposite of the trial court’s findings in paragraphs
5B (“61.23-acre property”) and 5C (“4-acre tract”) of the Final Decree of Divorce—that the two tracts were 62.5% community property. Thus, the trial court’s 5B and 5C findings that the two tracts belonged to BGS Realty were abuses of its discretion. See City of Keller, 168 S.W.3d at
814; Garza, 217 S.W.3d at 549.
We sustain Robyn’s first subissue.
D. Division of Sale Proceeds From 61.23-Acre Tract
In her second subissue, Robyn asserts that the trial court failed to properly divide the $1,924,000 Michael received from the sale of the 61.23-acre tract. We agree.
Because the two tracts were 100% community property, the proceeds from the sale of the 61.23-acre tract were also 100% community property. See Barnett v. Barnett, 67 S.W.3d 107, 111
(Tex. 2001) (“Generally, whether property is separate or community is determined by its character at inception . . . .”); accord Garza, 217 S.W.3d at 550; see also TEX. FAM. CODE ANN. § 3.003
(“Presumption of Community Property”).
We sustain Robyn’s second subissue.
E. Interest on Loan Funds
In her third subissue, Robyn argues the trial court erroneously failed to find that the $225,467 interest earned on the loan of the 61.23-acre tract’s sale proceeds were community property. We agree.
The $225,467 in interest on the loan of community property funds from the sale of the 61.23-acre property was earned during the marriage, there was no clear and convincing evidence 04-19-00736-CV of its separate nature, and we conclude it is also 100% community property. See TEX. FAM. CODE
[*8]ANN. § 3.003; Barnett, 67 S.W.3d at 111; Garza, 217 S.W.3d at 550.
We sustain Robyn’s third subissue.
F. Reimbursement Claim
In her fourth subissue, Robyn argues (1) her live pleading seeks reimbursement for her contributions to BGS Realty, (2) her claim was included in the auditor’s report, and (3) there was evidence to support her claim. Thus, she concludes, the trial court abused its discretion by failing to reimburse her claim. We disagree with her conclusion.
Although the trial court did not include a separate award to Robyn for her reimbursement claim against BGS Realty, the trial court’s decision whether to award the claim was “purely an
equitable one.” See Vallone v. Vallone, 644 S.W.2d 455, 458 (Tex. 1982) (“The rule of reimbursement is purely an equitable one.”); Chavez v. Chavez, 269 S.W.3d 763, 767–68 (Tex.
App.—Dallas 2008, no pet.) (citing TEX. FAM. CODE ANN. § 7.007(b)) (“Courts apply equitable principles to determine whether to recognize the claim for reimbursement and to order a division of the claim for reimbursement, if appropriate, in a manner the court considers just and right.”).
Like Knight, Robyn alleged Michael’s fraud on the community estate. Cf. Knight v. Knight, 301 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2009, no pet.) (concluding the trial court’s
failure to award a reimbursement claim for uncontroverted amounts the husband paid from the community estate without the wife’s permission was an abuse of discretion).
But unlike Knight, there is no evidence of an uncontroverted amount that Michael owed
Robyn as a reimbursement. Cf. id. at 731–32.
Further, Michael argued that the evidence supporting Robyn’s reimbursement claim was neither legally nor factually sufficient, and there was no evidence of the enhancement value as required. See Vallone, 644 S.W.2d at 459.
[*9]04-19-00736-CV
Moreover, because reimbursement is an equitable remedy, id. at 458, the trial court had discretion to find no amount due for reimbursement or to find that Robyn had been equitably compensated by other awards, see TEX. FAM. CODE ANN. § 7.007; Chavez, 269 S.W.3d at 768.
We overrule Robyn’s fourth subissue.
G. Appropriate Relief
Although Robyn asks this court to modify the decree to show the two tracts as 100% community property and affirm the decree as modified, we may not.
“[I]f property is mischaracterized and the mischaracterization is of such magnitude that it
affects the just and right division of the community estate, we must remand the entire case to the trial court for a just and right division based upon the correct characterization of the property.”
Boyd, 131 S.W.3d at 617; accord Garza, 217 S.W.3d at 549.
The record shows the value of the entire community estate was somewhere between $8 and $18 million, and as Robyn’s brief notes, the difference between a 62.5% and a 100% community property interest in the two tracts will result in a difference to her of more than $1 million.
Under these facts, we conclude that such an amount is a “mischaracterization . . . of such magnitude that it affects the just and right division of the community estate.” See Boyd, 131
S.W.3d at 617; cf. Monroe v. Monroe, 358 S.W.3d 711, 718 (Tex. App.—San Antonio 2011, pet. denied) (construing as de minimis the trial court’s mischaracterization of separate property as community property—where the value of the mischaracterized separate property was less than two
percent of the community estate). Therefore, “we [must] remand the entire community estate for a just and right division based upon the correct characterization of the property.” See Garza, 217
S.W.3d at 551; Boyd, 131 S.W.3d at 617.
- 10 - 04-19-00736-CV ROBYN’S SECOND ISSUE: SEPARATE PROPERTY PROVISION In her second issue, Robyn argues the trial court abused its discretion by including a separate property provision that neither party requested rather than the provision the parties had agreed to and the trial court verbally agreed to use. At a post-trial hearing on Robyn’s motion for the trial court to sign a final decree of divorce, Robyn proposed a separate property provision to include in the decree. Michael agreed to the provision, and the trial court stated it would use Robyn’s proposed provision. Nevertheless, in the final decree, the trial court included a separate property provision that was different. At the hearing on Robyn’s motion to modify or correct the decree, Robyn asked the trial court to delete the decree’s separate property provision, but she abandoned her request to include her previously proposed provision. Although Robyn complains that the trial court could not have substituted its provision over the one the parties agreed to, Robyn cites no authority to show the trial court’s (1) inclusion of the complained-of provision or (2) its refusal to delete it was outside its authority or otherwise an abuse of discretion. We overrule Robyn’s second issue. ROBYN’S THIRD ISSUE: NOT A JUST AND RIGHT DIVISION In her third issue, Robyn argues that the trial court’s division was not just and right. We agree. However, because we have already concluded that “we [must] remand the entire community estate for a just and right division based upon the correct characterization of the property,” see Garza, 217 S.W.3d at 549; Boyd, 131 S.W.3d at 617, Robyn’s third issue is moot. MICHAEL’S FIRST ISSUE: DUE PROCESS VIOLATIONS In his first issue, Michael argues he was denied due process because (1) he was denied the right to be heard at a meaningful time and in a meaningful manner, and (2) the striking of his reimbursement claim was a taking of his property rights without due process. - 11 - 04-19-00736-CV A. Applicable Law “The Texas Constitution provides that ‘[n]o citizen of this State shall be deprived of life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land.’” Perry v. Del Rio, 67 S.W.3d 85, 92 (Tex. 2001) (quoting TEX. CONST. art. I, § 19). “Due process at a minimum requires notice and an opportunity to be heard at a meaningful time and in a meaningful manner.” Tex. Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 658 (Tex. 2004) (citing Mathews v. Eldridge, 424 U.S. 319, 333 (1976)). “We review questions raising constitutional concerns de novo.” State v. Hodges, 92 S.W.3d 489, 494 (Tex. 2002) (citing Perry, 67 S.W.3d at 91); accord Scally v. Tex. State Bd. of Med. Exam’rs, 351 S.W.3d 434, 446 (Tex. App.—Austin 2011, pet. denied) (“We review claims regarding deprivation of constitutional rights de novo because they present questions of law.”). B. Right to be Heard Michael insists he was denied the right to be heard at a meaningful time and in a meaningful manner for several reasons.