Dallas Divorce Lawyer Blog

Disproportionate Shares of Community Estate: Fraud

When parties divorce the Court, according to Texas Family Code Section 7.001, makes a “just and right division” of the community estate. For most parties, this typically means an equal split of the community estate as to the assets and debts. However, there are some instances in which the Court could award a disproportionate share of the community estate and the statute allows for such as it does not mandate an equal division. In fact, the trial court has a lot of discretion in dividing the community estate.

For a disproportionate share of the community estate, the controlling opinion was issued in 1981 by the Texas Supreme Court in Murff v. Murff. There, the Court set out several factors for the courts to consider when they are making a just and right division of community property and debts. The factors are: the disparity of incomes or earning capacities of the spouses; the spouses’ capacities and abilities; benefits which the party at fault would have derived from a continuation of the marriage; business opportunities of the spouses; spouses’ educations; spouses’ relative physical and financial conditions; spouses’ separate estates (if any); nature of property to be divided; fault in the breakup of the marriage (adultery, cruel treatment, other spouse is convicted of felony and imprisoned for at least one year, abandonment for a year or more, living apart for at least three years, other spouse is confined to a mental hospital for at least one year); or parties’ attorneys fees.

In addition to these factors, there are also additional causes of action in divorces which would allow or create argument for a disproportionate share of the community estate.

Fraud is a separate economic tort in a divorce action and is either actual or constructive and is also known as fraud on the community. Actual fraud is defined in Stone v. Lawyers Title Insurance Company by the Texas Supreme Court as (1) a material representation was made; (2) it was false; (3) the speaker knew it was false or was reckless in making it without knowledge of its truth; (4) the speaker made the false material representation with the intent that the other party act on it; (5) the party did act on it in reliance of that representation; and (6) the party therefore suffered. Constructive fraud on the other hand is a breach of a legal or equitable duty. For instance, husbands and wives have fiduciary duties to one another and when that is breached, it is constructive fraud or a fraud on the community. An example would be if your husband just gave away property or charged a large sum of money on the credit card without your knowledge.

The Texas Supreme Court more recently defined fraud on the community in Schlueter v. Schlueter “as a wrong committed by one spouse which may be considered by the trial court in its division of the community estate and which may justify a disproportionate division.” Therefore, a trial court can award the requesting spouse a disproportionate share of the community estate to make up for the wrong of the other spouse. But, if it is so bad that there is not enough community estate to compensate the requesting spouse, then the trial court can choose to award a money judgment in the requesting spouse’s favor to make up for the loss. In the above referenced Murff case, the Court awarded a money judgment to the wife against the husband because he had a substantial amount in savings before the parties separated and those savings disappeared by the time the final trial rolled around.

Considering this, Schlueter removes the ability of the requesting spouse to have a separate cause of action for damages because the statutory remedy for the tort is already in place (fraud on the community). However, the requesting spouse can still sue the other spouse independent to the divorce action for actual fraud if the fraud was committed on the requesting spouse’s separate estate (property acquired before marriage or that which was acquired during the marriage by gift, devise or descent) and if proven, the requesting spouse can receive punitive damages.

Therefore, if you feel as though your spouse has committed fraud on the community estate, you must discuss this at the outset with your attorney so that they can properly plead for such cause of action with the divorce. You do not have two bites at the apple so make sure you plead for it when you have the chance because you cannot, as adjudicated in Schlueter, seek an additional cause of action beyond the divorce action.