ACCEPTED
03-14-00479-CV
4670942
THIRD COURT OF APPEALS
AUSTIN, TEXAS
3/27/2015 11:39:36 AM
JEFFREY D. KYLE
CLERK
Case No. 03-14-00479-CV
FILED IN
3rd COURT OF APPEALS
AUSTIN, TEXAS
3/27/2015 11:39:36 AM
IN THE THIRD COURT OF APPEALS JEFFREY D. KYLE
Clerk
KIM BLACKSTON CLOGSTON, Appellant
vs.
CURTIS P. CLOGSTON, Appellee
Appeal from Cause No. 05-D-540
From the 421st Judicial District Court
ofCaldwell County, Texas
APPELLANT'S BRIEF
AND
REQUESTFORORALARGUMENT
David K. Sergi
Texas Bar No. 18036000
DAVID K. SERGI &
ASSOCIATES
329 S Guadalupe
San Marcos, TX 78666
Tel: 512.392.5010
Fax: 512.392.5042
E-Mail: david@sergilaw.com
Attorney for Appellant
1
IDENTITY OF PARTIES AND COUNSEL
APPELLANT
Kim Blackston Clogston
APPELLEE
Curtis P. Clogston
PETITIONER'S COUNSEL AT TRIAL
David K. Sergi
State Bar No. 18036000
P.O. Box 887, San Marcos, Texas 78666
Tel: (512)-392-50 10
Fax: (512) 392-5042
E-Mail: david@sergilaw.com
RESPONDENT'S ATTORNEY AT TRIAL
Henry Newton Bell, III
State Bar No. 02095000
6000 N. Lamar Blvd, Ste. 210
Austin, Texas 78752
Tel: (512) 458-2233
Fax: (512) 458-2354
APPELLANT'S ATTORNEY ON APPEAL
David K. Sergi
State Bar No. 18036000
P.O. Box 887, San Marcos, Texas 78666
Tel: (512)-392-5010
Fax: (512) 392-5042
david@sergilaw.com
APPELLEE'S ATTORNEY ON APPEAL
Henry Newton Bell, III
State Bar No. 02095000
6000 N. Lamar Blvd, Ste. 210
Austin, Texas 78752
Tel: (512) 458-2233
Fax: (512) 458-2354
2
TABLE OF CONTENTS
Identity of Parties ..............................................................................2
Table of Contents ................·.............................................................. 3
Index of Authorities .............................................................................. 4
Statement of the Case ........................................................................ 5
Statement Regarding Oral Arguments. 00 0 0 . 0 0 . 0 0 . 0 0 . 0 0 • • • • 0 0 • • • • 0 0 • • 0 0 . . . . . . 0 0 • • 0 0 0 0 . 0 0 . . . . 6
Issues Presented .................................................................................. 6
Statement of the Facts ........................................................................ 7
Summary of the Argument .................................................................. 8
Stan.dard of Review .......................................................................... 9
Argument and Authorities .................................................................... 9
Point of Error Number One
Whether the Trial Court Erred in Dismissing Petitioner's Motion to Enforce
based on Respondent's assertion the Motion was barred by limitations of
TEX.FAMCODE ANN Sec. 9.003(a) or Sec. 9.003 (b) ........................ .. oo.9
Conclusion .................................................................................... 12
Prayer.......................................................................................... 12
Certificate of Service ........................................................................ 13
Certificate of Compliance .................................................................. 14
APPENDIX: 1. International Accounting Standards Board (IASB) Number 32
3
INDEX OF AUTHORITIES
Cases
Ford v. Ford, 2000 WL 1262469 (not reported in S.W.3d (2000) .................... 11
Statutes
Texas Family Code Section 9.003 ................................................. 5,8,10,12
Texas Family Code Sec. 9.003(a) ............................................... 6,8,9,11,12
Texas Family Code Sec. 9.003(b) .............................................. ... 6, 8,9,12
Texas Tax Code Ann. Section 151.009 ................................................... 10
Black's Law Dictionary (lOth ed.2014) .................... . .............................. 10
4
STATEMENT OF THE CASE
This is a direct appeal from civil cause number 05-D-540 in the 42lst
Judicial District of Caldwell County. The Appellant, Kim Blackston Clogston's
Motion to Enforce was denied based on Appellee's argument that Appellant's
Motion was to recover tangible property past the two-year statute of limitations.
Appellant denies that her motion was barred by limitations on the grounds that the
property sought to be enforced was intangible property and not subject to the two-
year statute of limitations imposed by Texas Family Code Section 9.003.
5
STATEMENT REGARDING ORAL ARGUMENT
Appellant requests oral argument in this case because he believes it will aid
the Court in making its detennination as to the issues presented herein.
Issues Presented
Point of Error Number One
Whether the Trial Court Erred in Dismissing Petitioner's Motion to Enforce
based on Respondent's assertion the Motion was barred by limitations of
TEX.FAMCODE ANN Sec. 9.003(a) or Sec. 9.003 (b).
6
STATEMENT OF FACTS
The Appellant and Appellee entered into an Agreed Final Decree of Divorce
on October 18, 2006. 1 Appellant was awarded a website known as
www.Qfg.com. 2 Appellant was further awarded the business known as Physicians
for Quality (PFQ) and the corporation entity known as PFQ, Inc. 3 Per the Agreed
Final Decree of Divorce, the parties were both entitled to utilize any unused
4
domain name variation or unused e-mail address associated with the site.
Appellee is listed as the administrator to the domain ofpfq.com. 5
Appellant attempted to make changes to the website www.pfg.com, but was
denied the ability based on the fact that Appellee is the administrator and has
denied Appellant the ability to make the necessary changes. Appeiiant then filed a
Motion for Enforcement of Property Division and Application for Temporary
Restraining Order, based W-13 Property to Wife regarding the website known as
www.p_fg.com wherein Appellee failed to execute all relevant documents necessary
to transfer the World Wide Web domain www.Rfg.com to Petitioner at a date and
place certain. 6
1 R.R Vol. I at 152-203
2 R.R. Vol. I at 176:13-14
3 R.R Vol. I at 176: 5-12
4 RR Vol. I at 176:13-14
s R.R Vol. I at 212:12-17
6 RR Vol. I at 212:25-27
7
Appellee argues that Appellant was not seeking an action to enforce, but
rather requesting a substantial change from the decree originally entered in 2006. 7
Appellee further argues that Appellant's motion is untimely based on Texas Family
Code Section 9.003(a) regarding enforcement of tangible property and Tex. Fam.
Code Section 9.003(b) regarding the enforcement of division of future property not
in existence at the time of the original decree. 8 Appellant denies this argument, as
Appellant is seeking the right to control the intangible property that was awarded
to her in 2006. Further, Appellant is not seeking the enforcement of tangible
property, rather, she is seeking the enforcement of intangible property. Therefore,
the trial court erred in dismissing Appellant's motion based on a flawed argument
by Appellee.
Summary of the Argument
The trial court abused its discretion in determining that the Appellant's
motion was barred by Section 9.003 of the Texas Family Code because the website
awarded to Appellant is not "tangible personal property" and Appellant was
unaware of her inability to make changes to the website until2012 when Appellee
refused to remove himself as Administrator.
7 R.R Vol. I at 242:11-24
a R.R Vol. I at 243-244
8
Standard of Review
As to the first point of error, review by the appellate courts on an adverse
ruling on a de novo basis.
On appeal, the appellate courts do not engage in their own factual review,
but rather decide whether the trial court's conclusions were supported by the
record. If the trial court's findings are supported by the record, appellate courts are
not at liberty to disturb them, and on review, address only the question of whether
the trial court improperly applied the law to the facts.
When the posture of a case does not present issues of pure fact, or of mixed
questions of law and fact that tum on credibility or dem~anor, and presents only
questions of the validity of the trial court's legal rulings (as in the instant case), an
appellate court's review is de novo.
ARGUMENT AND AUTHORITIES
Point of Error Number One
Whether the Trial Court Erred in Dismissing Petitioner's Motion to Enforce
based on Respondent's assertion the Motion was barred by limitations of
TEX.FAM CODE ANN Sec. 9. 003 (a) or Sec. 9. 003 (b).
I. The website awarded to Appellant is not "tangible personal property"
This appeals raises a fundamental question whose answer is obvious, is a
website tangible personal property or not. The answer is that it is intangible as one
cannot touch, feel or hold a website.
9
This case arises from an Agreed Final Decree of Divorce in the case below.
The Appellant was awarded "W-13. The website known as www.pfq.com, except
that both parties shall be entitled to utilize any unused domain name variation or
unused e-mail address associated with the site." 9 Neither party has attempted to
utilize an unused domain name variation or unused e-mail address with the site
since the decree was granted. However, Appellant's attempt to control the website
www.P-fq.com that was awarded to her has been denied by Appellee who remains
administrator of the domain, despite the award of that intangible property to the
Appellant.
The trial court abused its discretion in determining that the Appellant's
motion was barred by Section 9.003 of the Texas Family Code because the website
awarded to Appellant is not "tangible personal property" and Appellant was
unaware of her inability to make changes to the website until 2013 when Appellee
refused to remove himself as Administrator.
"Tangible personal property" is not defined in the Family Code. The Tax
Code defines it as "personal property that can be seen, weighed, measured, felt, or
touched or that is perceptible to the senses in any other manner... " TEX.TAX
CODE ANN. Section 151.009. Further, Black's Law Dictionary (lOth ed.2014)
defines "tangible property" as "Corporeal personal property of any kind; personal
9 R.R Vol. I at 176:13-14
10
property that can be seen, weighed, measured, felt, touched, or in any other way
perceived by the senses, examples being furniture, cooking utensils, and books" "
and defines "intangible property" as "Property that lacks a physical existence. •
Examples include stock options and business goodwill." In addition even
accountants agree that a web site is in tangible. See Standard Interpretations
Committee (SIC), and were subsequently endorsed by the International Accounting
Standards Board (IASB) Number 32 addressing the proper tax treatment of web
site costs.
In Ford v. Ford, Appellant was awarded cash from a specific account in the
decree but did not award Appellant any interest in the account itself. 2000 WL
1262469, (Not Reported in S.W.3d (2000)). However, cash is not tangible
personal property, but rather, intangible property, and therefore the award was not
subject to the two-year limitations period in Section 9.003(a). !d. Just like cash,
an award of a website is not tangible property and therefore not subject to the two-
year limitations period in Section 9.003(a).
Appellant acknowledges that the petition for Enforcement was filed after the
second anniversary ofthe date the decree was signed. 10 However, the award of the
website to Appellant was not tangible property. Because the website is not
tangible personal property, but rather, intangible property, the enforcement of the
10 R.R. Vol. I at 211-214
11
property was not subject to the two year limitations period in section 9.003(a) or
(b). As a result, given that a website simply cannot be tangible property as
contemplated by section 9.003 prong (a) or (b) simply do not apply and therefore
this must be reversed and remanded for a hearing on appellant's motion to enforce.
CONCLUSION
In light of the aforementioned discussion and analysis, it is clear that
reversible error occurred and that reversal must be granted and the case rendered,
or, the alternative that the case be remanded for a new trial.
PRAYER FOR RELIEF
Appellant request that this Honorable Court grant a reversal and rendering of
the verdict in Appellants favor as well as reversal and rendering of attorneys' fees
awarded to Appellee, or in the alternative that the case be remanded.
Appellant further requests any other relief to which he may be legally
entitled.
Respectfully submitted,
SERGI AND ASSOCIATES P.C.
329 South Guadalupe Street
San Marcos, Texas 78666
Tel: 512 392 5010
Fax: 512 392 5042
Email: David@Sergilaw.com
12
By: Is/ David K. Sergi
David K. Sergi
State Bar No. 18036000
E-Mail: david~gilaw.com
Attorney for Kim Blackston Clogston
CERTIFICATE OF SERVICE
I hereby certify that on the 27th day ofMarch, 2015, a true and correct copy
of the foregoing brief was served via electronic filing on Henry Newton Bell, III.
Is/ David K. Sergi
David K. Sergi
13
CERTIFICATE OF COMPLIANCE
I. This brief complies with the type-volume limitation of the Texas
Rules of Appellate Procedure 9.4(i)(2)(A) because:
1. This brief contains 1794 words, excluding the parts of
the brief exempted by TEX.R.AP.P. 9.4(1)(1)
2. This brief complies with the typeface requirements of
TEX.R.APP.P. 9.4(e) because:
i. This brief has been prepared in a proportionally spaced
typeface using Microsoft Work in 14 pt. Times New Roman.
14
. ,.
Deloitte. lAS PItt\
SIC·32 - lntang;ble Assets - Web S1te Costs
Quick Miele Unlcl ..
References
lAS 3< Intangible Assets
History
Date Development Comments
9 Juli 2001 SIC·D321ntangible Assets - ~ Site Costs publishedComment de:~d:lne 10 September 2001
25 Mll :h 200251C·32 Intangible Assets - Web St/e Costs Issued Effective 25 Matt:h 2002
Summary of SIC-32
SIC-32 concludes that a website developed by an entity using lntemal expenditure, whether for internal or external access, is an internally generated intangible asset that is subject to
the requirements oi iAS 36 /ntangib/e Assets.
SIC-32 identifies the following stages of website development.
Planning
Appl~tion and infrastructure development
Grnphical design development
Content development
Operuting
SIC-32 addresses the appropriate accounting treatment for internal expenditure on each of those stages of development and operation:
a. A website arising from development should be recognised as an intangible asset if, and only If, in addition to complying with the general requirements described in lAS 38.21 for
recognition and Initial measurement , an enterprise can satisfy the requirements in lAS 36.57. In panicular, an enterprise may be able to satisfy the requirement to demonstmte
how its website will generute probable future economic benefits under lAS 36.57(d) when, for ex:unple, the website is capable ol generating revenues, including direct revenues
from enabling orders to be pl:~ced. An enterprise is not able to demonstrate how a website developed solely or prirrorily for promoting and advertising its own products and
services will generate probable future economic benefits, and consequently all expenditure on developing such a website should be recognised as an expense when Incurred.
b. Any internal expenditure on the development and opera~on of an enterprise's own website should be accounted for in accordance with lAS 38. The nature or each activity for
which expenditure is incurred {eg training employees and maintaining the website) and the website's stage of development or post-development should be EMlluated to
determine the appropriate accounting treatment. For example:
Planning. The planning stage is simil:~r in nature to the reseatt:h phase In lAS 38.54·.56. Expenditure Incurred in this stage should be rocognised as an expense when it Is
incurred.
Application ond Infrastructure development, graphical design and content development stages. To the extent that content is developed for purposes other than to
advertise and promote an enterprise's own products and selVices, are similar in nature to the development phase in lAS 36.57 ·.64 . Expenditure incurred in these stages
should be Included in the cost of a website recognised as an intangible asset in accordance with this Interpretation when the expenditure can be directly attributed, or
allocated on a reasonable and consistent basis, to preparing the website for its intended use. For example. expenditure on purchasing or creating content {other than
content that advenises and promotes an enterprise's own products and services) specifically for a website, or expenditure to enable use ol the content (such as a fee for
acquiring a licence to reproduce) on the website, should be included in the cost of development when this condition is met. However, in accordance with lAS 38.71, ex·
penditure on an Intangible item that was initially recognised as an expense in previous financial statements should not be recognised as part of the cost of an intangible
asset at a later date (for instance, when the costs of a copyright have been fully amortised, and the content is subsequently provided on a website).
Content development. Expenditure incurred in the content development stage, to the extent that content is developed to advertise and promote an enterprise's own
products and services (such as digital photographs of products), should be recognised as an expense when incurred in accordance with lAS 38 S9(c). For example, when
accounting for expernllture on professional services for taking digital photographs of an enterprise's own products and for enhancing their display, expenditure should be
recognised as an expense as the professional services are received during the process, not when the digital photographs are displayed on the website.
Operating. The operating stage begins once development of a website is complete. Expenditure Incurred in this stage should be recognised as an expense when It is
e.
incurred unless it meets the criteria in lAS 38.1
:. A website th:lt Is recognised as an intangible asset under SIC·32 should be measured after Initial recognition by applying the requirements of lAS 38.72·.87. The best estimate of
a website's useful life should be shon.
f/www.lasplus.com/en/standards/slc/slc·32 Page 1 of 2
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