In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-11-00220-CV
IN THE MATTER OF THE MARRIAGE
OF MELISSA LEA GUNN EVERSE AND JOHANNES EVERSE
On Appeal from the County Court at Law No. 3
Lubbock County, Texas
Trial Court No. 2009-549,549, Honorable Judy C. Parker, Presiding
June 18, 2013
OPINION
Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.
In this appeal from a divorce decree, Johannes Everse and Melissa (“Lea”)
Everse both challenge the trial court‟s characterization of assets held in accounts. We
will affirm in part and reverse in part and remand for the trial court to reconsider its
division of the marital estate.
Background
The parties were married in July 1993 and separated in October 2009. Lea filed
for divorce that month. They had no children together. Johannes has a doctorate in
chemistry and was employed as a professor at Texas Tech University throughout his
marriage to Lea. Lea was a homemaker during her marriage to Johannes. Ultimately,
the trial court found the total value of the community estate to be $1,013,196.20 and
awarded $555,812.56 to Lea and $457,383.70 to Johannes.
Analysis
Applicable Law
There is a statutory presumption that all property possessed by either spouse on
dissolution of the marriage is community property. See Tex. Fam. Code Ann. § 3.003(a)
(West 2011); Tarver v. Tarver, 394 S.W.2d 780, 783 (Tex. 1965). The degree of proof
necessary to overcome the presumption is clear and convincing evidence. Tex. Fam.
Code Ann. § 3.003(b) (West 2011). Clear and convincing evidence is that measure or
degree of proof which will produce in the mind of the trier of fact a firm belief or
conviction as to the truth of the allegations sought to be established. Tex. Fam. Code
Ann. § 101.007. The proof must weigh more heavily than merely the greater weight of
the credible evidence, but the evidence need not be unequivocal or undisputed. Boyd v.
Boyd, 131 S.W.3d 605, 611 (Tex.App.—Fort Worth 2004, no pet.).
Tracing involves establishing the separate origin of property through evidence
showing the time and means by which the spouse originally obtained possession of the
property. Moroch v. Collins, 174 S.W.3d 849, 856-57 (Tex.App.—Dallas 2005, pet.
denied). To overcome the community property presumption, the party asserting
separate ownership must clearly trace the original separate property into the particular
assets on hand during the marriage. Cockerham v. Cockerham, 527 S.W.2d 162, 167
(Tex. 1975). The burden of tracing is a difficult, but not impossible, burden to sustain.
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Boyd, 131 S.W.3d at 612. As a general rule, mere testimony that funds came from a
separate source, without any tracing of the funds, will not constitute the clear and
convincing evidence necessary to rebut the community presumption. Id.; see In re
Marriage of Born, No. 06-08-00066-CV, 2009 Tex.App. LEXIS 2569, at *13-15
(Tex.App.—Texarkana April 16, 2009, no pet.) (mem. op.) (collecting cases); Osorno v.
Osorno, 76 S.W.3d 509, 512 (Tex.App.—Houston [14th Dist.] 2002, no pet.).
A showing of community and separate funds existing in the same account does
not divest the separate funds of their identity and establish the entire amount as
community, if the separate funds may be traced and the trial court is able to determine
accurately the interest of each party. Holloway v. Holloway, 671 S.W.2d 51, 60 (Tex.
App.—Dallas 1983, writ dism'd). In such cases, we presume the community funds are
drawn out first, before separate funds are withdrawn, and where there are sufficient
funds at all times to cover the separate property balance in the account at the time of
the divorce, we presume the balance remains separate property. Smith v. Smith, 22
S.W.3d 140, 146 (Tex.App.—Houston [14th Dist.] 2000, no pet.).
Husband‟s Appeal
Funds in Prudential Discovery Select Annuity
In Johannes‟ first issue, he contends the trial court mischaracterized as
community property part of the assets held in a Prudential Discovery Select Annuity
account. The record shows a balance of $53,257.80 in the account at the time divorce
proceedings were initiated. In its findings of fact, the trial court found $13,551.21 of the
3
amount to be Johannes‟ separate property, but treated the remaining $39,706.59 as
community property. It is this characterization Johannes challenges.
There is no dispute that Johannes traced the $13,551.21 to an Aetna account
which contained that amount at the time of the marriage. He contends he traced the
remaining $39,706.59 to accrued retirement benefits he received in 1994 from the
University of California, where he worked from 1969 to 1976.
When tracing separate property, it is not enough to show that separate funds
could have been the source of a subsequent deposit. Boyd, 131 S.W.3d at 612. Lea
points to gaps in Johannes‟ tracing evidence, including a gap of over ten years between
a November 1999 statement in evidence and a statement for September 2010. We
conclude the trial court did not err by finding Johannes‟ tracing evidence as to the
$39,706.59 to be less than the clear and convincing evidence required. Johannes‟ first
issue is overruled.
American State Bank Account #6061
In his second issue, Johannes similarly contends the trial court mischaracterized
funds in American State Bank account #6061 as community property because he
established their separate property character. At issue here again is the evidence
Johannes set forth at trial to show the savings balance of $23,773.84 in account #6061
was his separate property.
Johannes testified he placed his Social Security payments for 2010 in that
account. The record also indicates a document pertaining to the balances of the
accounts at American State Bank was present in the courtroom, and was discussed by
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the parties. The document was not offered into evidence, however, and we cannot
conclude the trial court erred by finding Johannes‟ testimony insufficient to establish the
separate character of the funds, particularly given his testimony that he transferred
funds from account to account. Boyd, 131 S.W.3d at 612; see In re Marriage of
Robbins, No. 06-10-00019-CV, 2010 Tex.App. LEXIS 6579, at *8-9 (Tex.App.—
Texarkana, Aug. 12, 2010, no pet.) (mem. op.).1 We overrule Johannes‟ second issue.
Just and Right Division
Johannes presents a third issue challenging the trial court‟s division of the
community property. Because our disposition of Lea‟s appeal will require remand of the
case for a new division, we need not address Johannes‟ third issue. Tex. R. App. P.
47.1.
Wife‟s Appeal
Treatment of Social Security Benefits
By her first issue, Lea contends the trial court erred by characterizing amounts
held in certain investment accounts as Johannes‟ separate property. The court found
1
We note also that the trial court awarded the disputed funds to Johannes. We
do not address his contention regarding the impact of the asserted characterization
error. He states only it appears from the trial court‟s findings of fact it would have
awarded him a larger share of community property and the “sum is not insignificant.”
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Johannes successfully traced the amounts to Social Security benefits2 he had
received.3
Defending the trial court‟s characterization, Johannes cites Richard v. Richard,
659 S.W.2d 746, 748-79 (Tex.App.—Tyler 1983, no writ), in which the court found
section 407(a) of the Social Security Act4 precluded division under community property
laws of Social Security disability benefits.5 Lea responds that Richard dealt with an
award to the wife of half of the husband‟s future monthly disability payments. Richard,
659 S.W.2d at 747. Here, she points out, the benefits have been received by Johannes
and are held in investment accounts. She argues treatment of the received benefits as
community property subject to a just and right division does not interfere with the federal
statutory system,6 and thus should not be precluded. Cf. Hisquierdo v. Hisquierdo, 439
U.S. 572, 588, 99 S. Ct. 802, 59 L. Ed. 2d 1 (1979) (addressing similar anti-attachment
2
See 42 U.S.C. § 402.
3
See generally Marvel, Annotation, Pension or Retirement Benefits as Subject to
Award or Division by Court in Settlement of Property Rights Between Spouses, 94
ALR3d 176 (1979).
4
42 U.S.C. § 407(a) provides:
(a) In general. The right of any person to any future payment under this title [42
USC §§ 401 et seq.] shall not be transferable or assignable, at law or in
equity, and none of the moneys paid or payable or rights existing under this
title [42 USC §§ 401 et seq.] shall be subject to execution, levy, attachment,
garnishment, or other legal process, or to the operation of any bankruptcy or
insolvency law.
5
See Granger v. Granger, 236 S.W.3d 852, 857 (Tex.App.—Tyler 2007, pet.
denied) (applying Richard to Supplemental Security Income benefits).
6
See generally Flemming v. Nestor, 363 U.S. 603, 80 S.Ct. 1367, 4 L.Ed.2d
1435 (1960); Helvering v. Davis, 301 U.S. 619, 57 S.Ct. 904, 81 L.Ed. 1307 (1937)
(describing purpose and structure of Social Security Act).
6
provision of Railroad Retirement Act, stating such provisions “ensure[] that the benefits
actually reach the beneficiary”). But in Philpott v. Essex County Welfare Bd., 409 U.S.
413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1972), the United States Supreme Court applied
section 407(a) to Social Security disability benefits that had been received and
deposited. Noting the benefits received were “moneys paid” within the language of
section 407(a), it found them protected. Id. at 415-16. Federal and state courts have
applied Philpott’s holding. See, e.g., Hoult v. Hoult, 373 F.3d 47, 56 (3d Cir. 2004)
(“There is no question that § 407(a) . . . applies to benefits after they have been
distributed to beneficiaries,” citing Philpott); Jones v. Goodson, 772 S.W.2d 609, 611
(Ark. 1989) (citing Philpott, noting the section 407(a) exemption “applies even after the
benefits are in the debtor‟s hands”); Fitzpatrick v. Leasecomm Corp., No. 12-07-00487-
CV, 2008 Tex.App. Lexis 6872, *5-*6 (Tex.App.—Tyler September 17, 2008, pet. ref‟d)
(mem. op.) (citing Philpott for proposition “benefits received retained the quality of
„moneys‟ and their exempt status even after they had been deposited in an account
where they were readily withdrawable for the recipient‟s benefit”). See also Wissner v.
Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424 (1950) (finding similar anti-
attachment provision in National Service Life Insurance Act precluded wife‟s community
property claim against life insurance policy proceeds paid to military member‟s parents
pursuant to his beneficiary designation).
We do not find a Texas case in which section 407(a) has been applied to
preclude a just and right division of Social Security benefits already received, but courts
in other states have applied section 407(a) to their laws regarding division of marital
property. The facts in Bowlden v. Bowlden, 794 P.2d 1145 (Idaho Ct. App. 1989),
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remanded, 794 P.2d 1140 (1990), are similar to ours. There, the husband began
receiving monthly Social Security benefits during the marriage. The marital community
had sufficient other income to support the couple so the benefits the husband received
from Social Security were deposited in checking and savings accounts. At the time the
parties were divorced, the husband claimed the money he received from Social Security
was his separate property, while the wife maintained it was community in nature. Id. at
1145. Citing cases including Hisquierdo, 439 U.S. at 577, the Idaho court concluded
Congress positively required by direct enactment that state law be preempted with
respect to the treatment of Social Security benefits. As a result, the court agreed with
the husband‟s characterization of the money he received as Social Security benefits.
Id. at 1147.
The court in Thibodeaux v. Thibodeaux, 712 So.2d 1024 (La.App. 1 Cir. May 15,
1998), reached a similar conclusion. There, the husband was awarded Social Security
disability benefits following a work injury during the marriage. The trial court
characterized those benefits as the husband‟s separate property on its dissolution. On
appeal, citing Hisquierdo, 439 U.S. 572, and Philpott, 409 U.S. at 417, the court noted
the “Congressional intent to preclude claims based on marital and family obligations as
well as those of ordinary creditors.” Id. at 1027. The court determined that the treatment
of Social Security disability benefits paid during the marriage as community property
would do "major damage" to "clear and substantial" federal interests and accordingly,
found the Supremacy Clause of the United States Constitution preempted classification
of the husband‟s Social Security disability benefits as community property. Id. at 1028.
See also Dinges v. Dinges, 743 N.W.2d 662, 670-71 (Neb. Ct. App. 2008) (similarly
8
finding section 407(a) precluded trial court‟s treatment of lump sum Social Security
disability award received by the wife as a marital asset subject to division; and
extending finding to amount of award traceable to modular home purchased after
couple‟s separation).
In addition to the anti-attachment provision, both the Idaho and Louisiana courts
found support for their conclusions Congress intended to “replace state family law as it
applies to Social Security,” Thibodeaux, 712 So.2d at 1028, in the comprehensive
benefit scheme provided the federal law. Those courts noted that Old Age Survivors
and Disability Insurance (OASDI)7 benefits are payable to the spouse, dependent
children and even the divorced spouse of the retired or disabled employee, in addition
to the benefits payable to the employee. Thibodeaux, 712 So.2d at 1028.
Section 407(a) notwithstanding, the Congress has permitted garnishment and
similar remedies for enforcement of child support and alimony obligations. 42 U.S.C. §
659(a). For that purpose it has defined “alimony,” however, to exclude payments or
transfers of property or its value in compliance with any community property settlement,
equitable division of property, or other division of property between spouses or former
spouses. 42 U.S.C. § 659(F)(i)(3)(B)(ii).
We are persuaded by the reasoning of courts in other states and conclude the
trial court was correct to exempt Johannes‟ Social Security benefits, though previously
received and at the time of divorce held in accounts, from the just and right division of
the community property. Lea‟s first issue is overruled.
7
42 U.S.C. §§ 402 et seq.
9
Dutch Social Security
Johannes is a native of the Netherlands and worked there from 1948 through
1960. In 1996, during his marriage to Lea, he began receiving what he described as
“Dutch Social Security” benefits. The trial court treated funds traceable to those
benefits as his separate property, in the same manner as his United States Social
Security benefits. By her second issue, Lea contends the trial court erred by doing so.
We agree.
Our conclusion Johannes‟ United States Social Security benefits were not
subject to division is the result of judicial application of our nation‟s “highly complex and
interrelated statutory structure” for Social Security. Flemming, 363 U.S. at 610
(describing legislative judgments inherent in specific provisions of Social Security
statutes). Our conclusion results directly from the specific provision precluding
assignment and attachment of benefits. Whether the Dutch system that produced
benefits for Johannes beginning in 1996 contains provisions contrary to application of
our community property laws to the benefits received and now held in accounts owned
by these Texas residents, we do not know. Nor do we know whether such provisions, if
in place, would have been binding on the trial court. And the record before us sheds no
light on the questions. We know Johannes‟ entitlement to the benefits is related to his
employment in the Netherlands, that the benefits are received in Euros and that they
are paid initially to an account in the Netherlands.
The funds in the accounts in question, like all assets in possession of the parties
on divorce, are presumptively community property. Tex. Fam. Code Ann. § 3.003 (West
10
2012) (all property owned or possessed at the time of divorce is presumed to be
community property); see Zagorski v. Zagorski, 116 S.W.3d 309 (Tex.App—Houston
[14th Dist.] 2003, pet. denied) (applying tracing to funds held, at time of marriage, in
foreign bank account). It was Johannes‟ burden to overcome the presumption by clear
and convincing evidence. Id. at 314. We cannot agree that funds are shown to be
exempt from division simply by evidence they are attributable to “Dutch Social Security.”
Lea‟s second issue is sustained.
Tracing Issues
In her third issue, Lea argues Johannes failed to meet his burden to provide clear
and convincing evidence of the separate property characterization of funds in particular
accounts. The trial court‟s characterization resulted in part from a tracing of funds to
Dutch Social Security benefits. Because we have determined the presumption of
community property applicable to funds from the Dutch benefits was not overcome, we
agree with Lea that a characterization of funds as separate that is dependent on tracing
to Dutch benefits was erroneous. To that extent, Lea‟s third issue is sustained.
Lea‟s argument in support of her third issue also includes a contention that the
trial court erred by taking into account, in its division of the community property, the
character as separate or community of certain funds that were withdrawn by Lea after
separation or were distributed pursuant to temporary orders during the pendency of the
divorce. Because some of the funds withdrawn or distributed were attributed to Dutch
Social Security benefits, and because we will remand the case for a new division of the
11
community property, we need not now address Lea‟s complaint concerning the previous
division.
Just and Right Division
In her fourth issue, Lea asserts the trial court‟s erroneous characterization of
funds as Johannes‟ separate property was harmful and requires remand for a just and
right division of the properly characterized community property. Because the funds
attributable to the Dutch Social Security were not divided as part of the community
estate, and because they have a value that would have affected the court‟s just and
right division, we agree remand is required. See Jacobs v. Jacobs, 687 S.W.2d 731,
732 (Tex. 1985); McElwee v. McElwee, 911 S.W.2d 182, 189 (Tex.App.—Houston [1st
Dist.] 1995, writ denied). Accordingly, we sustain Lea‟s fourth issue.
Conclusion
Based on the foregoing, we reverse that portion of the trial court‟s judgment
confirming as Johannes‟ separate property assets consisting of Dutch Social Security
benefits. We also reverse the portions of the trial court‟s judgment reflecting its division
of the community estate. In all other respects, we affirm the divorce decree. We
remand the case to the trial court for further proceedings consistent with this opinion.
James T. Campbell
Justice
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