COURT OF APPEALS

SECOND DISTRICT OF TEXAS

FORT WORTH

NO. 02-08-00201-CV

THERESA ANN SANDERS APPELLANT

AND APPELLEE

V.

ROYCE ALLEN SANDERS APPELLEE

AND APPELLANT

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FROM THE 360TH DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION1

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Appellant/Cross-Appellee Theresa Ann Sanders and Appellee/CrossAppellant Royce Allen Sanders appeal from the trial court’s judgment granting their

divorce. No children were born of the marriage; the issues concern only the trial

court’s characterization of marital property and division of the community estate.

Royce contends that mental incapacity is not a valid ground for setting aside the

1 See Tex. R. App. P. 47.4.
couple’s two postnuptial agreements and that the evidence is legally and factually

insufficient to support the trial court’s finding that Theresa lacked the mental capacity

to execute the agreements. Theresa contends that the trial court erred by

characterizing as separate three commercial lots of real property and the

improvements thereon (collectively, “the Property”) conveyed to Royce during the

marriage by the closely held class C corporation he had owned since before the

marriage. Because we hold that the trial court did not err, we affirm the trial court’s

judgment.

Mental Incapacity

During the marriage, Royce and Theresa executed two separate postnuptial

agreements, one in November 1997 and one in May 1999. In the divorce decree,

the trial court found that Theresa lacked the mental capacity to voluntarily enter into

the agreements. In the findings of fact and conclusions of law issued after our

abatement of this case, the trial court also found that Theresa “did not voluntarily

execute the November 1997 Post-Nuptial Agreement and the May 1999 Post-Nuptial

Agreement because she did not have the mental capacity to do so.” The trial court

therefore concluded that the two postnuptial agreements were not enforceable.

In his first issue, Royce contends that mental incapacity is not a ground for

setting aside a postnuptial agreement. He is technically correct. The controlling

statute provides that involuntariness and unconscionability are the exclusive

2
defenses to partition and exchange agreements.

2 There is no dispute that both the

1997 and the 1999 postnuptial agreements are partition and exchange agreements.

Royce concedes, however, that the trial court found that Theresa involuntarily

executed the agreements based on her mental incapacity. Further, we agree with

our sister court in Austin that common law contract defenses may influence our

analysis of voluntariness, which is not defined in the statute.

3 Mental incapacity is

a common law contract formation defense.

4 Accordingly, whether Theresa had

mental capacity to contract when she executed the agreements can and will inform

our analysis of voluntariness. We therefore overrule Royce’s first issue.

In his second issue, Royce contends that the evidence is legally and factually

insufficient to support the trial court’s finding that Theresa lacked the mental capacity

to execute the agreements. Findings of fact entered in a case tried to the court have

the same force and dignity as a jury’s answers to jury questions.

5 The trial court’s

findings of fact are reviewable for legal and factual sufficiency of the evidence to

2 See Tex. Fam. Code Ann. § 4.105(a), (c) (Vernon 2006).

3 See Sheshunoff v. Sheshunoff, 172 S.W.3d 686, 695–98 (Tex.

App.—Austin 2005, pet. denied); see also Tex. Fam. Code Ann. § 4.105.

4 In re Morgan Stanley & Co., 293 S.W.3d 186, 187 (Tex. 2009) (orig.

proceeding).

5 Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991).

3
support them by the same standards that are applied in reviewing evidence

supporting a jury’s answer.

6

We may sustain a legal sufficiency challenge only when (1) the record

discloses a complete absence of evidence of a vital fact; (2) the court is barred by

rules of law or of evidence from giving weight to the only evidence offered to prove

a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere

scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact.

7

In

determining whether there is legally sufficient evidence to support the finding under

review, we must consider evidence favorable to the finding if a reasonable factfinder

could and disregard evidence contrary to the finding unless a reasonable factfinder

could not.

8

When reviewing an assertion that the evidence is factually insufficient to

support a finding, we set aside the finding only if, after considering and weighing all

of the evidence in the record pertinent to that finding, we determine that the evidence

6 Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel, 881

S.W.2d 295, 297 (Tex. 1994).

7 Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998),

cert. denied, 526 U.S. 1040 (1999); Robert W. Calvert, "No Evidence" and

"Insufficient Evidence" Points of Error, 38 Tex. L. Rev. 361, 362–63 (1960).

8 Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007);

City of Keller v. Wilson, 168 S.W.3d 802, 807, 827 (Tex. 2005).

4
supporting the finding is so weak, or so contrary to the overwhelming weight of all

the evidence, that the answer should be set aside and a new trial ordered.

9

As the Austin court points out, “The ordinary meaning of ‘voluntarily,’ as

reflected in dictionary definitions, entails (1) intentional action, as opposed to

inadvertent or accidental action, (2) that is the product of the exercise of free will.”

10

To show mental incapacity, a person seeking to set aside an agreement must show

that she did not understand the nature and consequences of her act at the time the

agreement was made.

11 Whether a person had mental capacity to enter into an

agreement can be shown by circumstantial evidence including, for example, (1) her

outward conduct demonstrating an “inward and causing condition”; (2) preexisting

external circumstances tending to produce a special mental condition; and (3) a

mental condition before or after the relevant point in time from which her mental

capacity or incapacity could be inferred.

12 Generally, the issue of mental incapacity

9 Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986) (op. on reh’g);

Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965); In re King’s Estate, 150 Tex. 662,

244 S.W.2d 660, 661 (1951).

10 Sheshunoff, 172 S.W.3d at 695 (footnote omitted).

11 Mandell & Wright v. Thomas, 441 S.W.2d 841, 845 (Tex. 1969); Rowland

v. Herren, No. 03-07-00247-CV, 2010 WL 566881, at *2 (Tex. App.—Austin Feb. 19,

2010, no pet.) (mem. op.).

12 Bach v. Hudson, 596 S.W.2d 673, 676 (Tex. Civ. App.—Corpus Christi

1980, no writ); Rowland, 2010 WL 566881, at *2.

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is an issue of fact.

13

 Further, the necessary proof of mental incapacity is within the

common knowledge and experience of laypersons; therefore, expert testimony is not

required.

14

Royce, Theresa, and Ann Beal, Theresa’s licensed professional counselor,

testified. Additionally, several exhibits were admitted, most containing Theresa’s

medical records.

Theresa testified that she was forty-three years old at the time of trial, that she

had four adult children, and that she had been married five times, twice to Royce,

whom she had first met in February 1985. When they met, Theresa “was dabbling”

in “[m]ethamphetamines, street drugs, [and] speed,” but she denied using drugs after

they started dating. Three months after they met, Royce moved in with Theresa and

her children, even though he was still married. The next month, he rented a house

in Grapevine, where they all lived until August 1, 1985, when he reconciled with his

wife. Theresa and the children moved in with her parents, but she still saw Royce.

Theresa testified that she got pregnant in the fall of 1985 and that Royce told

her that she could either terminate the pregnancy or raise the baby alone, so she

terminated the pregnancy in January 1986. As a result of the abortion, her uterus

13 Fox v. Lewis, 344 S.W.2d 731, 739 (Tex. Civ. App.—Austin 1961, writ

ref’d n.r.e.); see Bank of Commerce v. Barton, 605 S.W.2d 638, 639 (Tex. Civ.

App.—Fort Worth 1980, writ dism’d).

14 Decker v. Decker, 192 S.W.3d 648, 652 (Tex. App.—Fort Worth 2006, no

pet.); Estate of Riggins, 937 S.W.2d 11, 19 (Tex. App.—Amarillo 1996, writ denied).

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had to be removed six weeks later, and within six months, her ovaries stopped

functioning. Theresa was on Medicaid at the time of her surgery because she had

no insurance. On cross-examination, Theresa admitted that she had also had an

abortion in the period between her first and second marriages.

Theresa testified that also in January 1986, she and her children moved into

a house that Royce had rented for them, and he moved in with them in February.

As of January 1986, Theresa testified, she had never had any drug treatment or

psychiatric or psychological care.

In 1988, they all moved to a house in Bedford. In May 1988, Theresa started

using methamphetamines again. Her usage increased, and she “started using more

and more and more and more.” She did not obtain any drug treatment in this period.

Theresa testified that a doctor, “Uncle Mike,” had had sexual intercourse with

her from the time she was seven years old until she was sixteen years old. She

testified that her father started “messing with [her]” when she was almost four years

old and had penetrated her on Christmas Eve when she was seven years old. Her

father’s sexual abuse of her continued until she was in her early twenties. During

the long period over which the sexual abuse occurred, she did not seek and was not

provided any psychological treatment.

Theresa testified that the first time she went to a treatment center for drug use

or psychological problems was in 1989 or 1990, when she went to Rio Valley

Recovery Center for depression. She said that she was hospitalized for severe

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depression and was very suicidal. She testified that she had taken “a bunch or

Royce’s pills.” She stated that Royce had not wanted her to go to the facility. He

testified that he did not know when she left home to go to the center and that he

went there to visit her. According to Theresa, she was diagnosed at the center with

severe depression and post-traumatic stress syndrome. She was prescribed

Pamelor but did not take it after she left the center.

In 1990 or 1991, Theresa traveled to Las Vegas and confronted her mother

about the doctor’s sexual abuse of her. She testified that she then began seeing Dr.

Webster, who diagnosed her as being bipolar in 1991. Royce testified on crossexamination that “[s]he had been diagnosed with everything,” and he could not

remember when she was first diagnosed as bipolar. Theresa stated that she

believed Dr. Webster placed her on Lithium, Tegretol, Depakote, and an anti-anxiety

drug. She testified that she tried to take the prescribed medication on a daily basis

until sometime after 1993, when she had no health insurance. While she was taking

the medication, “the more [she] was facing issues and dealing with stuff, the more

it seemed like [she] would override it, and it just wasn’t working.” Theresa’s breast

implants also ruptured during this time period. At the end of 1994, Royce divorced

his first wife.

Theresa testified that she sought treatment at JPS Trinity Springs Hospital in

late March or early April 1995. She stated that before she sought treatment, she had

tried to commit suicide, she had lost her breast, she could not walk and was

8
paralyzed from the waist down, she was in a wheelchair, and she had just gone

through chemotherapy. Theresa stayed at the hospital for a month. She testified

that she took medication for her bipolar condition while in the hospital and that it was

covered by Medicaid. According to Theresa, when she left the hospital, she was on

Zoloft, Depakote, and an anti-anxiety drug.

Theresa sought MHMR treatment in February 1995 and also attended a May

1995 appointment. She was discharged in November 1995 for failing to follow up.

On August 1, 1995, Theresa and Royce married in Jamaica. When they

returned home, they discovered her son “collecting blood in a vial.” Theresa testified

that “Royce said [they were] going to have to get an annulment. And then [she] was

going to have to get on Medicaid because he could not pay for [her son’s

treatment.]” He did not dispute her testimony. The marriage was annulled on

August 24, 1995. But the couple did not stop living together.

Theresa stated that she did not take her prescribed medication for her bipolar

condition until she “got back on Medicaid again, because [they] had no insurance.”

She also testified that she was back on it around Christmas 1995, and after that,

Royce hired her, and she had health insurance under his company policy. She

additionally testified that she believed that she took the medication as prescribed

until she lost her Medicaid in December 1995, when she remarried Royce.

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Theresa described 1995 as one of her hardest times:

I came out about my father. My kids were not doing good, at all. I

wasn’t a good mom. I couldn’t walk. I had a daughter inpatient while

I was inpatient. My [other] daughter . . . pushed my wheelchair over

there so I could see her. And Royce walked beside her. He couldn’t

handle pushing the wheelchair that I was in.

She stated that in 1995, she was still in denial about the bipolar diagnosis but had

started to believe that it was possible. Theresa testified that before her marriage,

she “didn’t see the manic. All [she saw] was the depression.” When asked if she

recalled how she felt when she was manic, she stated, “All I know is I didn’t sleep.

That’s all I remembered. I don’t remember the high. It felt like a low. I hurt. It felt

like a low. That was depression to me.”

Theresa testified that she believed that she continued to take her prescribed

medication in 1996, when she was seeing Dr. Bernard Rousch and therapist Colleen

Johnson. But she was “totally alienated” from her family in Las Vegas after

confronting them with the sexual abuse perpetrated on her by her father. She said

that she “felt like a zombie, like a robot sometimes[, and like she] just existed

through the day” until her doctors changed her medicine so that she “didn’t feel as

drugged.” But when asked about the effects of the changed prescriptions on her in

1996, she testified, “You didn’t feel. You didn’t feel joy. You just felt hurt. But you

didn’t feel joy. You didn’t feel. You just—you didn’t function. Sometimes I wouldn’t

cook. . . . I was tired a lot. [The medicine would] make you want to sleep.” These

effects occurred several months, lasting until near the end of 1996.

10
Theresa testified that in the first ten months of 1997, “[a] lot of yelling and

fighting and screaming” was occurring in the home. She testified that she believed

that she was under psychiatric care during this time and that she was on Lithium,

Depakote, Neurontin, Zoloft, Effexor, Paxil, and Risperdal. She stated that as an

effect of the medication, she did not smile and stopped laughing.

In the fall of 1997, Theresa and Royce both filed for divorce. Royce lived with

his ex-wife briefly before returning home to Theresa around Halloween in 1997.

After Royce and Theresa reconciled, they signed the first postnuptial agreement, as

did their lawyers. Theresa remembered signing it. At that point, Theresa was

seeing therapist Colleen Johnson several times a week because she and Royce

were having severe problems at home. On cross-examination, Theresa testified that

she saw her psychiatrist four times during the week that she and Royce signed the

first postnuptial agreement, including November 10, 1997, the day before they

signed it. She also testified that she saw her therapist on November 11, 1997, the

same day and immediately before she and Royce signed the first postnuptial

agreement and that Royce discussed the agreement with the therapist. Theresa

admitted that she participated in the conversation “[a]s much as [she] could.”

Theresa conceded on cross-examination that she was working some during

the months of October, November, and December 1997; that she had her first

checking account and credit card during that period and used them; that she

11
sometimes drove to the store and bought things; that she and Royce were both

raising the children; and that she knew what was going on some of the time.

But she also testified that she was on and off her medication during this

period, that sometimes she was “just numb,” “a robot,” “exist[ing],” and that she was

“not in a good place” on November 11, 1997. Specifically, she “was very suicidal.”

Theresa testified on cross-examination that she was not in the hospital when she

executed the first postnuptial agreement but that she “[s]hould have been.”

Theresa stated that she was still taking her medicine at that time but that she

could not discern any benefits from it. “They had to keep increasing it because it

was getting worse and worse. The depression was back, and it was worse. And it

was worse. It wouldn’t ease up, not then.”

In December 1997, about six weeks after she and Royce signed the first

postnuptial agreement, Theresa tried to kill herself again. She stated that she was

still taking her prescribed medication at that point but that it was still not helping.

She described her life during the months of October through December of 1997:

“We were going through a divorce. We were fighting. I wanted it to stop. I wanted

the pain to stop. I wanted us to stop hurting each other. I wanted the fighting to

stop. I wanted him to let me sleep at night.”

After she tried to kill herself, Theresa was committed to Harris Methodist

Springwood Hospital. Beal testified about the medical records from Springwood.

The application for detention, prepared in part by Royce, provides, “[Theresa] fired

12
a gun in her bedroom attempting to kill herself. She has a history of mental illness

and suicidal tendencies for about four years. She is also manic depressant.” The

exhibit shows that in the week preceding the shooting, Theresa had been on Prozac,

Neurontin, Estrogen, Lithium, Lithobid, and a testosterone medicine.

Royce admitted that he might have told the police on the night of her suicide

attempt that Theresa had a history of mental illness, and he admitted at trial to

knowing that she was manic depressive at that point. He also admitted that the

description—“she . . . was suicidal at times”—in the period before her December

1997 suicide attempt was “probably close.”

Theresa testified that after her release from the hospital in January 1998, she

was placed on a stronger dose of Risperdal for “psychotic episodes.” After she left

Springwood, she went to a “woman recovery place.” She testified that she was so

drugged that someone else had to drive her to the AA retreat that year.

In March 1998, Royce took Theresa to a Dallas psychiatrist. After three

sessions, she stopped seeing that psychiatrist because Royce asked her to and

because the company’s insurance no longer covered “serious mental health.”

Theresa testified that she then “had to go to a different type of doctor that would treat

[her] for depression and not bipolar. Because the insurance wouldn’t pay.” Royce

admitted that he stopped her from going to the Dallas psychiatrist because each

session cost him $150, and he did not want to pay the money.

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In September 1998, Theresa had a bladder surgery. About four weeks later,

she and Royce went to Las Vegas, where, according to Theresa, he raped her. She

explained that they had agreed to try to have sex but to stop if it hurt her. It hurt, but,

according to Theresa, Royce did not stop and “tore down the bladder surgery,”

causing bleeding. Royce testified that he stopped when she asked him to stop. At

that point, she and Royce separated, and she filed for divorce again. She and her

daughter moved into a hotel until approximately January 1999. Royce came to the

hotel to see her “[a]lmost all the time,” staying late but not spending the night.

During this time, Theresa was seeing another psychiatrist, Dr. Grant, and his

associates. Theresa stated that her medicine was changed to Wellbutrin, Adderall,

and Celexa. She testified that she took these medications until April or May 1999.

On direct examination by her lawyer, Theresa stated that without telling her doctors,

she took herself off Risperdal, which was part of her treatment for her bipolar

condition, in April or May 1999 because she “was having trouble functioning at work,

concentrating. [She] was starting to fall asleep at the board.” (Theresa still worked

for Royce’s company at that time and for Royce (or one of his companies) as of the

time of trial.) Theresa testified that Royce agreed that she was on too much

medication.

When asked how the medicine affected her, she answered,

It would make me moody. Sometimes I would be temperamental. I

couldn’t concentrate all the time. If he was trying to tell me something,

I would have to really focus hard at what he was telling me and trying

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to listen, because I really want[ed] to hear what he was saying, and it

was so cloudy.

Theresa testified that after she stopped taking Risperdal, she had more depression

but fewer mood swings. On May 21, 1999, two months after she and Royce

reconciled, they signed another postnuptial agreement, as did their lawyers. On

cross-examination, she testified that as of that date, she was still taking Risperdal

for psychotic episodes, that she had some psychotic episodes in May 1999, that she

stopped taking Risperdal shortly after signing the agreement, and that she told the

doctor that she had stopped taking it two weeks later. When asked on crossexamination whether she was in the hospital when the May 1999 postnuptial

agreement was executed, Theresa answered that she was not but “[s]hould have

been.”

When Theresa signed the May 1999 postnuptial agreement, she was seeing

Dr. Villarreal, one of Dr. Grant’s associates, monthly, or more frequently if she

needed it. She testified,

I was educating myself about my disease. So if I—if I started feeling

tired a lot, mood swings, noticing my temper was short, or I would pay

attention to what Royce was saying or the kids were saying[, M]om,

you’re getting snappy, or [M]om, this or that. I would become more

alert to what was going on. And then my own emotions. I started

feeling feeling again. And I started understanding what I was feeling.

And I knew when I was depressed. And I knew when I was suicidal.

And I knew when a thought would run through my head. And I wanted

it to stop.

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She stated that she was having suicidal thoughts “[s]ometimes several times a week”

during that time, that she continued to have them “[o]n and off throughout” 1999, that

she had had them since 1995, and that she continued to have them at the time of

trial. In September 1999, she began taking Clonazepam, which she understood

would calm her down and eliminate the highs and lows, or cycling, that she was

experiencing.

Beal testified that she saw Theresa from November 2000 until March 2002,

from July 2003 through October 2003, and then again in March 2004 through the

day of the trial on a monthly basis. Beal explained that she initially began treating

one of Theresa’s daughters in July 2000 for self-mutilation and drug use. Beal tried

to persuade Theresa to meet with her over the next four to six months because

“basically the daughter said [Theresa] was driving her crazy because of her mood

swings and her anger and her disjointed thoughts and just her inability to function.”

Beal finally met with Theresa and Royce in November 2000 regarding the daughter

and later, Theresa alone. In the initial interview, Beal “could tell that [Theresa] was

very disjointed.” Theresa’s participation in the interview was “[i]llogical banter. . . .

[Beal] just couldn’t follow her. . . . It was very hard for [Beal] to understand

[Theresa].” Beal was not treating Theresa at that point, so she could not diagnose

her, but Beal “felt like [Theresa] was manic at the time” and “like she was very

disjointed in her thinking.” Beal explained,

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She wouldn’t finish one sentence without starting another topic. She

would jump from one topic to another. She interrupted a lot and

brought up things way in the past that didn’t have a lot to do with what

we were talking about at the time. And talked incessantly, and it was

difficult to get her to stop because it wasn’t—it wasn’t necessarily

having to do with what we talked about. I found her very difficult to

understand. She wasn’t helpful.

Beal testified that at another session in November,

[Theresa] went on for probably half of the session just—and finally I just

told her that this was—that I felt like she was a major problem, and that

her mental health—and I explained to her she looked manic. She was

not thinking—you know, thinking clearly, and that she couldn’t finish a

sentence before another one.

Beal explained why she concluded that Theresa was manic:

She couldn’t sit still. She was all around the office. She couldn’t stop

talking. Just on and on and on. Even when I tried to get her to sit

down, she had trouble. She kept having to hold her hands. When she

would sit, she would shake. And that’s why she said she couldn’t sit

still. And her talking, incessant talking without a lot of clear thought.

Beal testified that when she discussed Theresa with Royce on November 5, 2000,

[He] referred to [Theresa’s] obsessive compulsive diagnosis. Her

anxiety being severe. That she was—had been drugging on speed

were in quotes. Told me about her past drug use. That she was in a

treatment center in New Mexico. That I needed to teach her

boundaries. That she had no understanding of appropriate boundaries

with people. That she would get in their face. That she would interrupt

them. That she would do very inappropriate things.

He said that Theresa’s constantly telling him I can’t stand the

abuse. I can’t take the abuse. And he did not know what abuse she

was referring to, felt like she was making that up. Royce states that

wife is very unstable. I put that in parenthesis. And then he put—I

asked how long, and he just said forever. He wanted me to get

her—her meds stabilized and to get her head straightened out. And

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said—he said—I put this in quotes, she can’t function at all. And then

I just have out beside it in quotes, crazy.

I asked him—he started telling me about some meds she had

been on, even hormone medicine. I mean it was just—he just said she

was on tons of medicine. That it didn’t make sense. She would go

from medicine to medicine, and not always take it regularly. I asked

how long she had been on medicine, and he just said forever.

He said she hates me calling her crazy. He said she used to go

to both AA and NA. He told her she might as well stop; that she’s too

unstable; it’s not helping her; she didn’t go regularly enough. That she

was to the point where he would have to drive her places because she

would get lost, and he didn’t want to be taking her places like that.

She read her notes from the session into the record:

Royce states that wife is very unstable, in quotes, forever, in

quotes, obsessive compulsive, Effexor and Celexa. He said the

medicines she was on or had been on. Please get her meds and her

head straightened out. She can’t function. And then it’s got at all, and

in quotes later, crazy, just try to change her.

And then it says[,] ask Theresa about all of her psychiatrists.

And then it has a list of meds. Hormone medicine, not detailed meds[;]

it just says meds, Effexor, hormone medicine. Bipolar, question mark,

because he didn’t say it like he knew for sure. Was she manic,

question mark. I asked the question how long had she been with all of

these? And he said forever, but it sounded like an exaggeration.

A lot of this discussion was him—the two times I saw him, were

exaggeration, negative about her health. I asked if she had ever been

diagnosed? He said yes, but he didn’t know the diagnosis. And the

only other thing it says is she hates me calling her crazy.

Royce denied telling Beal that Theresa could not function at all and was crazy

and denied telling Beal to get Theresa’s medicine and head straightened out. He

also denied calling Theresa crazy.

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Theresa’s attorney questioned Beal further about her notes about Royce:

Q. Down at the bottom under where she hates him calling her crazy,

there’s some quotes. And what does this say?

A. It’s about her going to the AA and NA meetings. He said she

used to go. And he was just saying he told her to stop because

she’s too unstable. She was having—he didn’t want to have to

drive her. He didn’t want to go. I can’t. I don’t want to. He

thought she should stop. So—

. . . .

Q. Okay. And what plans did he say, though, he had to deal with;

starting with outbursts?

A. Okay. Her problems. Outbursts, forgetfulness, inability to

process, mood swings, raging. . . .

Beal testified that she agreed with Royce that Theresa was very unstable and

very hard to deal with. Beal also testified that Theresa was severely ill.

Initially, Theresa told Beal that she had been hospitalized three times in the

past, had attempted suicide, and had been prescribed lots of medicine, but it was

unclear to Beal what medicines Theresa was taking at that point and what her

diagnoses were. Theresa told her that she was taking Haldol, which Beal testified

is a very strong antipsychotic drug, and Risperdal, which Beal testified was another

antipsychotic drug, and that she had been taking them a long time. Beal was

concerned because usually the two antipsychotics are not prescribed simultaneously

and also because Theresa did not realize that they were antipsychotic drugs. Beal

diagnosed Theresa with Bipolar I, which Beal testified is the severest form of the

19
disorder, anxiety-induced anorexia, and obsessive compulsive disorder. Beal read

from her notes:

My initial diagnosis of Theresa Sanders at this time, this is in the initial

from seeing her, number one, bipolar disorder I; most recent episode,

manic; severe without psychotic features. Two, ADHD inattentive type,

with no hyperactivity. Three, post-traumatic stress disorder. Four,

Obsessive Compulsive Disorder and possible anorexia nervosa caused

from the bipolar and anxiety. . . .

I consider Ms. Sanders unable at that time when she was—I was

seeing her to make any well thought out decisions logical or otherwise.

Her thoughts were disjointed, as I found her unable to complete a

thought without jumping to another topic or forgetting her thoughts in

midsentence. [Theresa’s daughter] stated her mom had been this way

for a long time. Ms. Sanders admitted to suicidal thoughts one week

prior to our initial session, and approximately four suicide attempts in

the past, and hospitalizations at Springwood Hospital, Allied Hospital,

and in Santa Theresa, New Mexico. . . .

Beal described Bipolar I:

The main definition is flight of ideas, grandiose in that you often

will think you’re someone that you’re not, or believe that things are

happening that are not happening, disjointed thinking, not sleeping, or

needing sleep for days and days and days, unproductive behavior

repetitively, it’s just unproductive, incessant talking.

There are ten things that qualify for Bipolar I. And, mainly, it’s the

severity of not needing sleep and the movement behavior, that anyone

that sees her would think she was not well.

Beal referred Theresa to a psychiatrist, Dr. Minirth, and reviewed his notes:

From Dr. Minirth’s initial note, he diagnosed her with ADHD,

OCD, hypomanic state at the time she was in session, and then a dash,

bipolar, schizophrenic is what he put, that’s the way he wrote it. Having

. . . [f]lat affect. He just described her behavior, which is usually what

they do when they diagnose anybody with schizophrenia. . . . That’s

what he diagnosed her with.

20
Beal defined schizophrenia:

Schizophrenia is an isolation and inability to deal with people. An

inability to, what we call, function in society in a normal—with a normal

behavior where they can hold—retain thought, retain memory. Often

they’ll see things or hear things or be severely paranoid. I don’t have

the diagnosis in front of me with the details.

Beal testified that she wondered if Theresa was schizophrenic in her first visit

because her mania was so severe and that she found over time that Theresa was

schizophrenic. Beal also testified that bipolar disorder is thought to be genetic but

that it usually manifests itself because of trauma or an ongoing stressor. She

testified that schizophrenia is environmental in that certain trauma causes the central

nervous system to not develop properly. She testified that schizophrenia and bipolar

disorder both get worse if untreated. Beal testified that the sexual abuse that

Theresa suffered at the hands of her father and “Uncle Mike” was a type of trauma

that could lead to schizophrenia.

After beginning her treatment of Theresa and obtaining further medical history

and records, Beal

considered her being very unstable for a long time going untreated for

a very long time. And the reason it got so severe, in my opinion, was

because it was not treated consistently and had been going on, what

seemed for like just from what I got from previous medical records and

history, up to ten years before I saw her.

I ordered records because that’s what I’m supposed to do. And

so it seemed like it had been going on a long time. And so I picked up

my treatment with her to stabilize her on both medicine and for all of the

things that she was diagnosed by me and the Minirth Clinic, combined,

to work on each one to make her stable . . . .

21
The medical records Beal obtained included “lab reports, past psychiatrists[‘] and

counselors[‘ records], follow-up with doctors and treatments from surgeries that she

had, neurology reports, and diagnosis from various doctors.” Beal had psychiatric

reports from 1991 to 1995 as well as those from Dr. Minirth. The records showed

that Theresa was diagnosed with bipolar disorder as early as 1993, when she was

hospitalized after her first suicide attempt.

Theresa’s trial counsel asked Beal to give an opinion about how long Theresa

had been unable to make decisions:

Q. My question is: Based upon your review of the various medical

records, psychiatric information that was provided to you, based

upon, in your interviews or treatment of Ms. Sanders, do you

have an opinion as to how long, from the information you have,

that she was unable to make decisions?

A. From the medical records, I would say ‘93. From history and

talking to her and looking through everything, my—medical

records [are] factual. My opinion, because of the symptoms and

the diagnosis, which resolve—which start with abuse or since

she was a child, I don’t factually know that. My job—and I can

diagnose. That is my job. I can’t see a client without diagnosing

them if it’s a true illness. I am a medical professional. My job is

just to tell you what I saw from history and then during my time

I saw her. But medically, ‘93, from the facts.

Beal testified that Theresa had taken antipsychotics, anti-anxiety, and bipolar

medicines. The antipsychotics—Depakote, Zyprexa, Risperdal, and Haldol—would

help Theresa think clearly and not hallucinate. Often, according to Beal,

antipsychotics work quickly, within two days to two weeks. But the records Beal

ordered showed that Theresa had been on and off them for years; Beal opined that

22
the frequent usage was to control Theresa’s manic episodes. Beal also testified that

people with bipolar disorder are never supposed to stop taking their medicine and

that they “usually . . . get psychotic or severely depressed and suicidal” if they stop

taking their prescribed medicine. She explained that if they get psychotic, then they

have an inability to focus or function, have flights of ideas, are manic, do not sleep,

and have more delusions.

Beal testified that Theresa did not stay on her prescribed medications, as

reported by both Royce and Theresa. Beal testified that this circumstance would

affect Theresa’s ability to make rational decisions and was consistent with Beal’s

finding that Theresa was unable to make decisions.

On cross-examination, Beal testified that she believed that Theresa was

competent on the day of Beal’s testimony and admitted that she had no personal

knowledge of Theresa’s behavior before they met in November 2000. She also

contrasted Theresa’s behavior at trial and her behavior in November 2000. Beal

testified that in her opinion, Theresa would not have been competent on May 15,

1999, a week before the second postnuptial agreement was signed, to sign a

contract to buy a new car “[b]ecause for her to be as severe as she was when I met

her, I don’t think she could have been that way a year before.” Beal explained that

“[j]ust because you’re bipolar doesn’t mean you’re incompetent. But from the

knowledge [Beal] had of [Theresa] taking her medicine, and especially over the last

year before [Beal] saw her, for her to be that severe, it had to be going on a long

23
time.” Beal testified that she did not know whether Theresa could have balanced a

checkbook in 1999 but that she thought not, based on her observations later in

November 2000. Beal admitted that she did not “know as a fact” that Theresa was

not in the same mental state on May 15, 1999 as she was that day at the trial but

stated that she could only give her opinion. Beal also answered, “Yes” to Royce’s

trial counsel’s question, “And do you think that she was just out of it each time she

got married?”

Beal testified that she thought that Theresa should have been hospitalized in

November 2000 and on other occasions and had suggested it then if no one would

be able to stay with Theresa. Beal also testified that in November 2000, she did not

believe that Theresa was competent to be driving in traffic. Beal also testified that

by January 2001, she suggested that Theresa not engage in any business activity.

When asked, “Is it your position with the court, ma’am, that prior to your treating this

lady in—in the beginning of November of 2000, that she should not have been held

responsible to the standard—to any standards prior to that time?”, Beal answered,

[T]here are certain things I think she would have been held responsible

for. If she had hurt her children or anything like that, whether she was

bipolar or manic or psychotic or any of that, I think she should have

been held responsible. Do I think she was able to make any legal

decisions or any banking decisions or anything like that, I don’t think

she would have known what she was doing very well.

Beal testified that she did not believe that Theresa should be held responsible for

any legal decision from the time she became really sick, but she admitted that she

24
did not know exactly when Theresa became really sick. Beal testified that the

medical records provided evidence that in May 1999, Theresa was not at least in the

same mental condition she was at trial. Beal explained that the evidence would be

“an inference from [Theresa’s] abilities and the records in ‘97 and her abilities when

[Beal] met her.”

Beal also testified that Theresa was not on medication in 1999 and that she

did not think that Theresa was treated at all in 1999 because Royce and Theresa

both told her so. Beal testified that she did not believe that Theresa was making any

healthy decisions in May 1999 and that Theresa required both medicine and

treatment to get better.

Beal testified that Theresa stopped treatment in March 2002 and that Theresa

told her that it was because of the cost. Theresa, who testified that she “started

going a lot less” “[p]robably in 2001, approximately in March, maybe,” verified that

she stopped seeing Beal because of the expense, which was not covered by

insurance. Theresa testified that she went back to see Beal on a few occasions but

did not go back more often because she did not have the money.

Theresa also began seeing Dr. Minirth in late 2000 and saw him

“[a]pproximately three months for stabilization.” She testified that her drugs were

then changed to Wellbutrin and “the new drugs.” She admitted that she was again

diagnosed as bipolar. Theresa stopped seeing Dr. Minirth “[p]robably [in] April” 2001

because the visits were not covered by her insurance and were therefore too

25
expensive. After Dr. Minirth, Theresa went back to Dr. Villarreal. He subsequently

moved. At the time of trial, she was seeing another doctor in his office on a monthly

basis.

Beal admitted that she did not “exactly know” what Theresa’s mental state was

between March 2002 and July 2003, but stated that Theresa was “pretty severe”

when she came back to treatment in 2003.

Royce’s theme appeared to be that Theresa was lying regarding the effects

of her mental illness on her mental capacity in 1997 and 1999. On crossexamination, Theresa admitted to telling Royce soon after they first met that her

baby daughter had died, which was a lie, and also admitted that he had given her

money to bury the baby. Theresa testified that the baby had needed “to be invisible.”

After her own counsel objected, and Theresa continued to testify (which happened

continually during this portion of the trial over the objections of both counsel),

Theresa testified,

I’m sorry. I’ve got a problem when I’m looking at someone, I

can’t see. I’m focused here right now, and I’m not seeing him when he

stands up. I hear him, but I don’t see him stand up.

. . . .

When I’m focusing this way or like this. When he stand up, it’s

like I don’t see him over here stand up.

. . . .

26
I can hear him when he talks. The same way when I was

listening to Mr. King, I directly look at Mr. King. Because if I’m looking

at you, I’m concentrating and I’m understanding what you’re saying.

Theresa also testified on cross-examination that “it was the same way then [in 1997

and 1999]. I’m just like this then, but worse, a whole lot worse. Ask him. He

knows.”

When asked whether he believed that Theresa was “okay, mentally,” from

1997 through 1999, Royce answered, “I don’t know. Is she okay now?” To the

follow-up question, “You don’t know?” he answered, “I don’t know. No, I don’t know.”

Initially, we reject Royce’s argument that Beal’s testimony is no evidence

because it is speculative. Royce did not object to her testimony at trial on the basis

of her qualifications as an expert, nor did he raise a pretrial challenge on that basis.

Further, we note that Beal’s opinions regarding Theresa were based on her review

of medical records and her own personal knowledge. That all the records and

eyewitness observations were not on the same dates that the postnuptial

agreements were signed is of no moment; a factfinder may rely on circumstantial

evidence including “preexisting external circumstances tending to produce a special

mental condition” as well as evidence of “a mental condition from which its existence

at the time in question may be inferred” to determine mental incapacity.

15

Consequently, considering all the evidence and applying the appropriate

standards of review, we hold that the evidence is legally and factually sufficient to

15 Bach, 596 S.W.2d at 676; Rowland, 2010 WL 566881, at *2.

27
support the trial court’s findings that Theresa involuntarily signed the agreements

based on her mental incapacity and the trial court’s conclusions that the postnuptial

agreements were therefore not enforceable. We overrule Royce’s second issue.

Characterization of the Property

In November 1979, more than fifteen years before his marriage to Theresa,

Royce formed Euless Excavating, Inc., a closely held C-corporation. At the

September 2007 trial, he was the sole owner of all the corporate stock, and he was

and had always been the corporation’s president. But he testified that the

corporation had not been in active business for approximately three-and-a-half to

four years.

In 1980, the corporation bought three commercial lots on S. Euless Main

Street, Fort Worth, Texas. Royce testified that he paid $90,000 by check through

the corporation for the lots. He further testified that the buildings on the land were

built and paid for before his marriage. Theresa described the Property:

Well, building A used to be Euless Excavating and Royce

Sanders Trucking, Inc. Okay. And that consisted of two huge bays and

a three-room office with a bathroom and things like that. And then it’s

got a hoist and everything out in the shop. It’s got a huge backyard. A

backyard, I mean fenced in area for the equipment that used to be.

And it’s rented out now.

And then (unintelligible) is next door. They’ve got a huge—I think

it’s two bay. And I think most of them are done with like metal

structures around them. And the front one is done also in metal. Now

building D used to be Legend and (unintelligible) is now taking it over,

too. And that’s a concrete—that one’s pretty new; 1990, I would say.

And it’s been kept in excellent condition. And the one in front. There’s

28
actually four buildings. And then he’s fenced in two areas that used to

be car lots. Well, not really car lots, but storage for cars.

. . . .

. . . And it’s got a huge driveway.

In August 2001, the corporation conveyed the Property to Royce. The deed,

signed by Royce as the president of the corporation, recites that the Property was

conveyed to Royce as his sole and separate property. At the time of the

conveyance, Royce was the sole owner and stockholder of the corporation. He

testified that at the time of the conveyance, the corporation was still doing some work

but was going out of business, and he was looking forward to selling it at some point.

Royce testified that he did not pay anything to the corporation for the Property

and that no transfer of cash or anything of value was made in exchange for the

Property. He testified that he discussed with his accountant the tax advantages of

the transaction. He explained that if he sold the Property individually, he could take

advantage of the 15% capital gains tax rate. Otherwise, if the corporation sold the

Property, then both the corporation and Royce would have to pay taxes, and Royce

would pay taxes at his normal rate rather than at the more favorable capital gains

rate. Royce still owned the Property at trial.

Note I to the corporation’s financial statements of fiscal years ending

September 30, 2000, and September 30, 2001, provides, however, that “[o]n

September 30, 2001, the Company sold its land and buildings to Royce Sanders.

29
The sale price was $350,000 which resulted in a gain of $125,943.” Royce testified

that he did not know whether the corporation reported capital gains on the sale of the

Property. He also testified that since the conveyance, he had received the rental

income for the use of the Property. Respondent’s Exhibit 31 includes the couple’s

joint 2006 income tax return, which lists as income the rental income from the

Property as well as dividends from the corporation. The couple’s joint income tax

returns for tax years 2004 through 2006 also reflect depreciation deductions for the

buildings, but Royce testified,

I didn’t depreciate anything. I’ve got a CPA that does that. I don’t. I

don’t look at those books. I don’t know how. I quit at the beginning of

the tenth grade. I couldn’t do it if I wanted to.

The corporation’s 2005 income tax return reflects rental expense for the rent paid by

the corporation to Royce.

Bryan Rice, a forensic accountant appointed by the court, testified that other

than the corporation’s tax return and financial statements for the year of the

transaction, none of the financial records he received from the parties, which were

incomplete, showed that the corporation had received money in exchange for the

Property, that Royce had paid the corporation money for the Property, or that Royce

signed a promissory note in exchange for the Property. Specifically, Rice admitted

that he and his associates had “been provided with a great many bank statements

and a great deal of information”—more than fifteen Bankers Boxes of

documents—but stated that a lot of bank statements were missing. Rice stated that

30
he had reviewed documents pertaining to the conveyance of the Property from the

corporation to Royce. Rice admitted that he had not seen where Royce had paid

cash, written a check, or signed a promissory note in exchange for the Property, nor

had he seen an influx of cash in that amount on the corporation’s ledgers. But Rice

pointed out that the corporation’s tax return noted that there was a sale of land for

$236,600 and a sale of improved property for $113,400. He also testified that the

corporation recognized the gain on its income tax return. While Rice admitted that

there was no evidence that any cash was paid or any note was given, he stated that

the tax return was evidence that a transaction had occurred.

Rice also explained that he thought that avoiding potential double taxation was

the main benefit of the transaction:

If you—if you look at the totality of the situation, here’s what I

think the benefit was: I think the benefit of having this property on their

1040 was that the net rental income would be subject to tax on the

1040. If the property stayed in the corporation, it would have been—the

net rental income would have been subject to tax at the corporate level.

And if that net rental income would have ever been pushed out to Mr.

and Ms. Sanders as a dividend, it would have been taxable again to

them.

Theresa testified that early in 2001, Royce had discussed his plan to “buy the

[Property], draw the rent, retire, [and] draw his Social Security.” She testified that

she knew that the Property was deeded to Royce. She also testified that she

believed the property was worth $1.7 million.

31
Theresa challenges the trial court’s findings that the corporation sold the

Property to Royce as his sole and separate property, that community property funds

were not used to purchase the Property, that the transaction was completed for tax

purposes upon the advice of a CPA, and that no funds exchanged hands, and she

also challenges the trial court’s conclusion that the Property is Royce’s separate

property. She contends that the findings and the conclusion are not supported by

the record.

Property owned by either spouse at the dissolution of the marriage is

presumed to be community.

16 However, the community presumption is defeated by

evidence that a spouse received property by deed reciting that the property was

conveyed as the spouse’s sole and separate property, and the property is then

presumed to be separate.

17

 Thereafter, the spouse contending that the property is

community property has the burden to defeat the separate property presumption.

18

Additionally, separate property that merely undergoes mutations or changes in form

remains separate property.

19

16 Tex. Fam. Code Ann. § 3.003(a) (Vernon 2006); Todd v. Todd, 173

S.W.3d 126, 127 (Tex. App.—Fort Worth 2005, pet. denied).

17 Kyles v. Kyles, 832 S.W.2d 194, 196 (Tex. App.—Beaumont 1992, no

writ) (citing Hodge v. Ellis, 154 Tex. 341, 277 S.W.2d 900, 904 (Tex. 1955)).

18 Id.

19 Legrand-Brock v. Brock, 246 S.W.3d 318, 321 (Tex. App.—Beaumont

2008, pet. denied); Harris v. Harris, 765 S.W.2d 798, 802 (Tex. App.—Houston [14th

Dist.] 1989, writ denied).

32
The recital in the deed that the corporation conveyed the Property to Royce

as his sole and separate property displaced the community presumption and created

a new, rebuttable presumption that the Property is Royce’s separate property.

20

Rice’s testimony that the corporation recognized the gain after the transaction,

Theresa’s testimony that Royce had discussed “buying” the Property from his

corporation, and the note appended to the corporation’s financial statements

indicating that a sale had occurred, as well as the evidence that Royce did not pay

the nominal consideration of ten dollars recited in the deed, did not defeat the

presumption that the Property is Royce’s separate property, in light of the deed

recital and the evidence that Royce did not pay anything of value to his corporation

or sign a promissory note for the Property, that the transaction was completed for tax

reasons on the advice of his accountant, and, significantly, that Royce wholly owned

the corporation (and therefore ultimately, the Property) at the time of the conveyance

as well as at the time of the divorce.

21 We note that the Property’s becoming

Royce’s direct asset rather than his asset indirectly as an asset of his wholly owned

20 See Kyles, 832 S.W.2d at 196.

21 See Fazakerly v. Fazakerly, 996 S.W.2d 260, 266–67 (Tex.

App.—Eastland 1999, pet. denied) (holding that wife overcame community

presumption regarding leasing companies formed during marriage when evidence

showed that she but not husband was named on stock certificates of the leasing

companies and that they were formed to shield her separate property companies

from liability, and no evidence showed that $1,000 payment was made from

community funds).

33
corporation is a mere mutation of form that, under these facts, does not affect the

Property’s characterization.

22

Accordingly, we hold that the evidence is legally and factually sufficient to

support the trial court’s findings that the corporation sold the Property to Royce as

his sole and separate property, that community property funds were not used to

purchase the Property, that the transaction was completed for tax purposes upon the

advice of a CPA, and that no funds exchanged hands, and we hold that the evidence

is legally and factually sufficient to support the trial court’s conclusion that the

Property is Royce’s separate property.

Theresa’s further complaints about the trial court’s finding and conclusion that

she is entitled to a disproportionate award of the community estate and the

conclusion that the trial court made a just and right division of the community estate

rest solely on her argument that the Property is community. Because we have

already held that the trial court properly concluded that the Property is Royce’s

separate property, we also reject these complaints. We overrule Theresa’s issue.

22 See Legrand-Brock, 246 S.W.3d at 321; Harris, 765 S.W.2d at 802.

34
Conclusion

Having overruled Royce and Theresa’s issues, we affirm the trial court’s

judgment.

LEE ANN DAUPHINOT

JUSTICE

PANEL: DAUPHINOT, GARDNER, and WALKER, JJ.

GARDNER, J. concurs and dissents without opinion.

WALKER, J. concurs without opinion.

DELIVERED: October 14, 2010

35