TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-98-00334-CV
David Brian Keep, Appellant
v.
Kathryn Elizabeth Keep, Appellee
NO. 96-1004-FC2, HONORABLE ROBERT MORSE, JUDGE PRESIDING
BACKGROUND
David and Kathryn Keep were married on September 28, 1991. A son was born on October 27, 1993. David and Kathryn separated in July 1996, and Kathryn filed for divorce on July 19, 1996. In a bifurcated trial, the child custody issue was tried before a jury in August 1997. The jury appointed appellee Kathryn Elizabeth Keep sole managing conservator of the Keeps' only child. The division of property, possession schedule, and child custody payments were later tried before the trial court in December 1997 and January 1998. On March 3, 1998, the trial court signed a Final Decree of Divorce.
On April 4, 1998, David Keep filed a motion for new trial and a motion to suspend his child support payments pending appeal. Following a hearing in which David Keep testified that he was unable to pay the $3,000 per month in child support awarded to Kathryn Keep in the divorce decree because he had lost his job and was collecting unemployment, the trial court denied his motion to abate or reduce his child support payments. The motion for new trial was overruled by operation of law on May 18, 1998.
On May 28, 1998, David Keep filed a notice of appeal challenging the trial court's March 3, 1998 Final Decree of Divorce. In six issues, Mr. Keep complains about the trial court's determination characterizing Mrs. Keep's workers' compensation settlement as her separate property, characterizing property acquired by Mr. Keep prior to marriage as community property, and awarding reimbursement of community funds expended on his separate property without proof of enhancement. In addition, David Keep complains about the trial court's order that he pay $ 3,000 per month in child support and that he pay Mrs. Keep $51,552 in attorney's fees for the divorce proceedings and $5,000 for an appeal without proof of reasonable attorney's fees. (1)
DISCUSSION
Workers' Compensation Benefits
In his first two issues, David Keep contends that the trial court erred in characterizing Kathryn Keep's workers' compensation settlement as separate property and in awarding her reimbursement for community expenses paid from the proceeds of the settlement. Kathryn Keep sustained her injuries while the Keeps were married and still living together; however, she did not receive her settlement until after the couple had separated but before they were divorced. Mrs. Keep argued before the trial court that because injury and settlement occurred in California, California law should apply to the trial court's characterization of her workers' compensation settlement. Under California law, workers' compensation settlements awarded after a couple is separated and the divorce petition has been filed is separate property. See In re Marriage of McDonald, 52 Cal. App. 3d 509, 513, 125 Cal. Rptr. 160, 162 (Ct. App. 1975).
Under Texas law, separate property includes "the recovery for personal injuries sustained by the spouse during marriage, except any recovery for loss of earning capacity during marriage." Tex. Fam. Code Ann. § 3.001(3) (West 1998). In its findings of fact and conclusions of law, the trial court simply characterized Kathryn Keep's workers' compensation settlement as her separate property. The court provided no further explanation or application of law, whether from Texas or California. We conclude, however, that whether we apply California or Texas law, Mrs. Keep's workers' compensation settlement is her separate property.
Kathryn Keep presented evidence at trial in the form of depositions on written questions of two California attorneys showing that no portion of her workers' compensation settlement included a recovery for lost wages or loss of earning capacity. Mrs. Keep has demonstrated by clear and convincing evidence that her workers' compensation benefits do not include any recovery for loss of earning capacity. (2) Accordingly, she is also entitled to reimbursement for community expenses paid from the proceeds of the workers' compensation settlement. (3) The contentions raised in issues one and two are overruled.
Plano, Texas, Property
In his third issue, David Keep contends that the trial court erred in awarding his wife 50% of his house in Plano, Texas, because it was purchased as his separate property prior to their marriage. (4) Property possessed by either spouse during or on dissolution of marriage is presumed to be community property, and the party challenging the presumption must trace and demonstrate by clear and convincing evidence that the property is separate. See Tex. Fam. Code Ann. § 3.003 (West 1998). Clear and convincing evidence is the degree of proof that will produce in the mind of the trier of fact a firm belief or conviction about the allegations sought to be established. See id. § 101.007 (West 1996). Tracing involves establishing the origin of the property through evidence showing how the spouse claiming the asset as separate property obtained possession of the property. See Hilliard v. Hilliard, 725 S.W.2d 722, 723 (Tex. App.--Dallas 1985, no writ). In reviewing the division of marital property, we note the trial court exercises wide discretion in dividing the estate of the parties. See Jacobs v. Jacobs, 687 S.W.2d 731, 733 (Tex. 1985). However, only community property is subject to division; the trial court cannot divest a spouse of separate property. See id.
At trial, Kathryn Keep testified that the Plano house was purchased when she and David Keep were engaged and that only his name was on the deed. In addition, Mrs. Keep offered evidence of her reimbursement claim on the Plano house. Based on this evidence, we conclude that the trial court abused its discretion in awarding Kathryn Keep a 50% interest in the Plano house. Having been purchased by David Keep prior to his marriage to Kathryn Keep, the Plano house was not subject to division. See Wilkerson v. Wilkerson, 992 S.W.2d 719, 722-23 (Tex. App.--Austin 1999, no pet.). Accordingly, the contention raised in issue three is sustained.
Proof of Enhancement
In issue four, David Keep contends that the trial court erred in awarding Mrs. Keep reimbursement for community funds expended on his properties in Dover, New York, and Plano, Texas, and the time-share in Shawnee. Specifically, he contends Mrs. Keep did not prove that the separate properties were enhanced in value as a result of the expenditure of community funds. "The right of an estate to reimbursement from another estate is an equitable right and should be determined by equitable principles." Dakan v. Dakan, 83 S.W.2d 620, 627 (Tex. 1935). Great latitude must be given the trial court in applying equitable principles to value a claim for reimbursement; the discretion to be exercised in evaluating a claim for reimbursement is equally as broad as that discretion subsequently exercised by the trial court in making a "just and right" division of the community property. Penick v. Penick, 783 S.W.2d 194, 198 (Tex. 1988).
"[A] claim for reimbursement for funds expended by an estate for improvements to another estate is to be measured by the enhancement in value to the benefitted estate." Anderson v. Gilliland, 684 S.W.2d 673, 675 (Tex. 1985). This measurement is to be applied whether the claim for reimbursement is based on funds expended for payment of a purchase-money debt or for a capital improvement to another estate. Penick, 783 S.W.2d at 197. The party claiming the right of reimbursement has the burden of proof. Jensen v. Jensen, 665 S.W.2d 107, 110 (Tex. 1984); Vallone v. Vallone, 644 S.W.2d 455, 459 (Tex. 1982).
In the instant case, the trial court awarded Kathryn Keep reimbursement for the community funds expended on the following three properties:
One-half of the funds expended on the Dover, NY Property, for which PETITIONER is awarded $18,666.21, and for which let judgment issue;
One-half of the funds expended on the Plano, TX property for which PETITIONER is awarded $26,943.65, as for which let judgment issue;
One-half of the funds expended on the Shawnee Time Share for which PETITIONER is awarded $1,363.96, and for which let judgment issue.
However, the trial court did not address the issue of Mrs. Keep's reimbursement claims in its findings of fact and conclusions of law. In addition, our review of the evidence reveals that Mrs. Keep failed to present evidence to show that the community funds expended on these three properties enhanced their value.
Kathryn Keep presented documentary evidence in the form of checks and invoices representing the total funds expended on each of the three properties. She further testified that the funds covered a variety of expenses, including taxes, mortgage payments, and improvements on the Plano house; utilities, insurance, taxes, and pet sitting on the New York house; and maintenance fees on the Shawnee time share. Mrs. Keep did not testify or present other evidence of the enhanced value of any of the three properties resulting from the community expenditures, nor did she show what portion of the mortgage payments made on the Plano property went to reduce the principal balance of the purchase-money debt. Therefore, she has not met her burden of proving her reimbursement claim on any of the three properties. We sustain the contentions raised in David Keep's fourth issue.
Child Support
In his fifth issue, David Keep asserts that the trial court erred by exceeding the presumptive guidelines for awarding child support for his son. He contends that under the guidelines he is obligated only to pay $1,050 per month in child support. He argues that the trial court erroneously awarded Mrs. Keep $3,000 per month without findings based on the proven needs of the child.
A trial court has broad discretion in determining the amount of child support and whether the movant has met her burden of proof. See Hammond v. Hammond, 898 S.W.2d 406, 407 (Tex. App.--Fort Worth 1995, no writ). These determinations will not be overruled on appeal unless appellant shows a clear abuse of discretion. See id. "An abuse of discretion occurs when the trial court acts without reference to any guiding rules or principles; in other words, if the act was arbitrary or unreasonable." Id. The appellate court may not substitute its judgment for that of the trial court, even if it would have reached a different result. See Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223 (Tex. 1991).
If the obligor's net resources exceed $6,000 per month, the trial court must apply the presumptive guidelines provided in section 154.125 of the Texas Family Code. Without further reference to the percentage recommended by these guidelines, however, "the court may order additional amounts of child support as appropriate, depending on the income of the parties and the proven needs of the child." Tex. Fam. Code Ann. § 154.126(a) (West 1996). In its findings of fact and conclusions of law, the trial court determined that David Keep's net resources exceeded $15,000 per month. The court further found that, applying the guidelines of section 154.125 to the first $6,000 of David Keep's net resources, Mr. Keep was obligated to pay $1,050 per month in child support. However, the court ordered an increase to $3,000 per month based on the following reasons:
the age of the child; the managing conservator's lack of education and training; the longstanding health problems of the managing conservator; the managing conservator's low income earnings potential[;] the possessory conservator's financial resources, including interest in several pieces of real estate; the possessory conservator's college education, military and sales experience, and proven earning ability.
David Keep contests the award of child support beyond the $1,050 threshold. By law, an award in excess of the presumptive award must be based on the unmet needs of the child only. See Rodriguez v. Rodriguez, 860 S.W.2d 414, 417 (Tex. 1993). The needs of the child, however, are not limited to "the bare necessities of life." Id. at 417 n.3; Thomas v. Thomas, 895 S.W.2d 895, 896 (Tex. App.--Waco 1995, writ denied). Rather, it is an ambiguous term that has never been defined by the Family Code; consequentially, it has been left for the courts to determine in their discretion on a case-by-case basis.
Given the broad discretion granted trial courts to determine the needs of the child, we cannot conclude that the court in the instant case abused its discretion in setting the support order at $3,000. The testimonial evidence on the current expenses for Kathryn Keep and her son amounted to $6,400. The items listed by Mrs. Keep included rent, home maintenance, utilities, groceries, and insurance. Also included were items such as medical expenses, child care and education, entertainment, gifts, and clothing and haircuts. See Thomas, 895 S.W.2d at 897 (court modified support where movant introduced household budget based on expenses for prior year as evidence of increased needs). The trial court is allowed to allocate the support of the child between parents based on income and the circumstances of the parties. See Tex. Fam. Code Ann. § 154.126(b); Zajac v. Penkava, 924 S.W.2d 405, 409 (Tex. App.--San Antonio 1996, no writ). We conclude that the trial court acted pursuant to guiding rules and principles and that there was sufficient evidence in the record to support his action. No abuse of discretion has been shown. Therefore, the contention raised in issue five is overruled.
Attorney's Fees
In issue six, David Keep contends that the trial court erred in awarding Kathryn Keep attorney's fees at the trial level without proper evidence of the time her counsel spent in preparation of the case. In addition, he argues that her counsel failed to present sufficient evidence to warrant an award for attorney's fees on appeal. In a suit for divorce the trial court may award costs to any party as it deems reasonable. See Tex. Fam. Code Ann. § 9.014 (West 1998); Jones v. Jones, 890 S.W.2d 471, 476 (Tex. App.--Corpus Christi 1994, writ denied); Gendebien v. Gendebien, 668 S.W.2d 905, 909 (Tex. App.--Houston [1st Dist.] 1984, no writ). Mrs. Keep's attorney testified at trial about the work she performed, her hourly fee, and that her fees were reasonable and necessary. Evidence exists to support the award of attorney's fees to Mrs. Keep at the trial level. Therefore, we cannot say that the trial court abused its discretion by awarding Mrs. Keep her attorney's fees at the trial level.
However, we cannot conclude that sufficient evidence was presented to warrant an award of attorney's fees on appeal. The trial court awarded Kathryn Keep $5,000 for an appeal to this Court. However, we have not received a brief from Mrs. Keep in this appeal. Because her counsel has not earned any fees with regard to Mr. Keep's appeal, we will modify the divorce decree to exclude the $5,000 fee awarded to Mrs. Keep for an appeal to this Court. Therefore, we sustain in part and overrule in part the contentions raised in issue six.
CONCLUSION
We reverse the portion of the decree awarding Mrs. Keep one-half interest in the Plano, Texas, property and render judgment confirming the Plano, Texas, property as David Keep's sole and separate property. We reverse the portion of the decree awarding Mrs. Keep reimbursement for expenditures related to the three separate properties and render judgment that no reimbursement be awarded Mrs. Keep on those properties. We reverse the portion of the divorce decree that awards $5,000 in attorney's fees to Kathryn Keep's counsel for an appeal to this Court and render judgment that no attorney's fees be awarded for such an appeal. As so modified, we affirm the remainder of the decree.
J. Woodfin Jones, Justice
Before Justices Jones, B. A. Smith and Yeakel
Affirmed in Part; Reversed and Rendered in Part
Filed: August 12, 1999
Do Not Publish
1. Mr. Keep also raises a seventh issue challenging the trial court's orders suspending his possession of, and access to, his child without proper notice and opportunity to be heard. Because these orders were signed after the divorce decree and the notice of appeal only appeals the divorce decree, this issue is not properly before this Court. Accordingly, we will not address the merits of issue seven.
2. In his brief, David Keep cites to the deposition testimony of Kenneth Lee Rosen, one of the California attorneys who testified on behalf of Mrs. Keep, as evidence that the workers' compensation settlement may have included lost wages or compensation for medical benefits already paid out of community funds. We conclude, however, that his testimony does not make such a showing. Mr. Rosen first testifies generally as to what such a settlement may include; he does not testify that Mrs. Keep's settlement included lost wages or reimbursement for prior medical treatment paid from community funds. Instead, he specifically states that "[n]o portion of Kathryn Keep's settlement is compensation for lost wages, whatsoever, either during the time she was out of work or after."
3. David Keep also argues that Kathryn Keep's testimony was contradictory in tracing her settlement funds to community expenses for her reimbursement claim. Great latitude is given to the trial court in applying equitable principles to value a claim for reimbursement. See Penick v. Penick, 783 S.W.2d 194, 198 (Tex. 1988). We conclude that the trial court did not abuse its discretion in valuing Mrs. Keep's reimbursement claim on her workers' compensation settlement.
4. David Keep further notes that even if the Plano, Texas, house was properly characterized as community property, the trial court erred in awarding Mrs. Keep reimbursement for one-half the funds expended on the house during the marriage.
t her counsel failed to present sufficient evidence to warrant an award for attorney's fees on appeal. In a suit for divorce the trial court may award costs to any party as it deems reasonable. See Tex. Fam. Code Ann. § 9.014 (West 1998); Jones v. Jones, 890 S.W.2d 471, 476 (Tex. App.--Corpus Christi 1994, writ denied); Gendebien v. Gendebien, 668 S.W.2d 905, 909 (Tex. App.--Houston [1st Dist.] 1984, no writ). Mrs. Keep's attorney testified at trial about the work she performed, her hourly fee, and that her fees were reasonable and necessary. Evidence exists to support the award of attorney's fees to Mrs. Keep at the trial level. Therefore, we cannot say that the trial court abused its discretion by awarding Mrs. Keep her attorney's fees at the trial level.
However, we cannot conclude that sufficient evidence was presented to warrant an award of attorney's fees on appeal. The trial court awarded Kathryn Keep $5,000 for an appeal to this Court. However, we have not received a brief from Mrs. Keep in this appeal. Because her counsel has not earned any fees with regard to Mr. Keep's appeal, we will modify the divorce decree to exclude the $5,000 fee awarded to Mrs. Keep for an appeal to this Court. Therefore, we sustain in part and overrule in part the contentions raised in issue six.
CONCLUSION
We reverse the portion of the decree awarding Mrs. Keep one-half interest in the Plano, Texas, property and render judgment confirming the Plano, Texas, property as David Keep's sole and separate property. We reverse the portion of the decree awarding Mrs. Keep reimbursement for expenditures related to the three separate properties and render judgment that no reimbursement be awarded Mrs. Keep on those properties. We reverse the portion of the divorce decree that awards $5,000 in attorney's fees to Kathryn Keep's counsel for an appeal to this Court and render judgment that no attorney's fees be awarded for such an appeal. As so modified, we affirm the remainder of the decree.
J. Woodfin Jones, Justice
Before Justices Jones, B. A. Smith and Yeakel
Affirmed in Part; Reversed and Rendered in Part
Filed: August 12, 1999
Do Not Publish
1. Mr. Keep also raises a seventh issue challenging the trial court's orders suspending his possession of, and access to, his child without proper notice and opportunity to be heard. Because these orders were signed after the divorce decree and the notice of appeal only appeals the divorce decree, th