Ex-husband’s realty ruled separate property despite joint mortgages

In Rivera v. Hernandez, the Court of Appeals of Texas, El Paso, reversed the trial court's property division order in a divorce case that real property that the husband purchased before the marriage was community property. The Appeals Court said the property continued to be the husband's separate property even though it was later mortgaged several times and used as collateral on joint loans given to both the husband and the wife during their marriage.

Background of the case

The facts surrounding the property can be summarized as follows:

  • The husband's property was purchased in 1983 for $12,000, subject to a mortgage.
  • Construction of a home on the property began in March 1983.
  • A warehouse was built on the property in 1983, at a cost of $22,000.
  • Two mobile homes were added to the property in 1984, costing $18,000.
  • A storage facility was built on the property in 1985, which cost $5,000.
  • The foundation for the house was poured in 1985, at a cost of $12,000, plus $18,000 in materials.
  • The husband paid off the mortgage and obtained a lien release in March 1992.
  • The couple began living together in April 1992.
  • The couple married in 2004.
  • A 3,360 square foot home was built on the property during the marriage.
  • In 2008 the couple jointly filed a designation of homestead upon completion of the house, which was appraised at $170,000.

Community property presumption

Under Texas law, all property interests at the time of dissolution of the marriage are presumed to be community property. To rebut the presumption, the spouse claiming that assets are separate property must submit clear and convincing proof of the property's separate character. Examples of separate property include property interests that were owned before the marriage, or acquired during the marriage by means of a gift or an inheritance. Even property that was purchased during the marriage may be characterized as separate property if the purchase was made from funds traceable to a spouse's separate estate.

The trial court's decree

The decree ruled that the property was community property, and awarded both the land and the improvements, to the wife.

The ruling of the Court of Appeals

The Court of Appeals held that the promissory note, deed, and release of lien established sufficient proof under Texas law that the property was the husband's separate estate. Although the parties made a joint filing of a designation of homestead when construction of the home was completed, the Appeals Court held that this did not change the characterization of the property. The court further noted that, because of the homestead designation, the property could not be sold or encumbered without the wife's consent. Thus, the fact that both spouses signed a promissory note which pledged the land as collateral also did not affect the property's status as the husband's separate property.

The court also held that a mistake by the husband on the sworn inventory he filed with the trial court, in which he inadvertently listed the property as community property, was not a binding admission.

The court ruled that the trial court's property division award was in error and remanded the case back to the trial court, stating that the award was contrary to the Texas Family Code and the Texas Constitution because it divested the husband of his separate property.

Individuals facing a divorce or other domestic relations proceedings are urged to consult with a competent attorney, experienced in such matters for the protection of their legal rights.