NO. 12-09-00274-CV

IN THE COURT OF APPEALS

TWELFTH COURT OF APPEALS DISTRICT

TYLER, TEXAS

JAMES TRUMAN HENSLEE, § APPEAL FROM THE

APPELLANT

V. § COUNTY COURT AT LAW

MARY GLENDA HENSLEE,

APPELLEE § ANDERSON COUNTY, TEXAS

MEMORANDUM OPINION

This is an appeal from a decree of divorce. In two issues, James Truman Henslee 

complains the trial court erred in characterizing his separate property as community property so 

that its property division divested him of his separate estate. We affirm.

BACKGROUND

Mary and James Henslee married on August 29, 1996. On September 24, 1996, James 

was injured while performing his duties as a trainman for the Burlington Northern and Santa Fe 

Railway Company. James filed suit against the railway company seeking damages for lost 

wages, diminished earning capacity, past and future physical pain, physical impairment, and 

mental anguish, and past and future medical services and care. James settled with the railroad 

for $465,000.00 and executed a release of all claims.

James placed the settlement proceeds in two joint tenancy accounts at A.G. Edwards. 

Prior to the marriage, James had purchased three disability policies renewable monthly. James 

also deposited the proceeds from the disability policies in the A.G. Edwards joint accounts. It 

was James‟s decision to place the proceeds in a joint account in the names of James and Mary 

Henslee. Mary occasionally wrote checks on the accounts to buy items for the house. James did

not withdraw any of the money except to pay court approved attorney‟s fees.
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Mary filed her petition for divorce on January 17, 2003. On September 23, 2004, the trial 

court signed a Final Decree of Divorce Nunc Pro Tunc. The court granted James‟s motion for 

new trial on November 18, 2004 “on the sole issue of the characterization of the FELA 

settlement and, if a different characterization is found, its effect on the property division.”

The court heard the case again on June 4, 2007. On August 26, 2009, the court signed a 

final decree of divorce. The court awarded James “[o]ne-half of the community portion of the 

A.G. Edwards‟ accounts . . . which includes proceeds from James Truman Henslee‟s lawsuit and 

Trustmark policy proceeds . . . .” The court awarded the other one-half to Mary ($91,992.06). 

The court also awarded Mary the house, but awarded James reimbursement of $62,082.00. The 

court found that $20,015.61 in the A.G. Edwards accounts was James‟s separate property and 

$5,265.00 was Mary‟s separate property.

CHARACTERIZATION OF PROPERTY

In his first issue, James challenges the trial court‟s characterization of the proceeds of the 

FELA settlement as community property. In his second issue, he challenges the trial court‟s 

characterization of the disability insurance payments from Trustmark Insurance Company as 

community property. The trial court‟s rulings, he argues, divest him of his separate property, an 

error that requires reversal.

Standard of Review

The standard of review for property division in family law cases is abuse of discretion. 

Wilson v. Wilson, 132 S.W.3d 533, 536 (Tex. App.–Houston [1st Dist.] 2004, pet. denied). In 

determining whether the trial court abused its discretion, the reviewing court must decide 

whether the trial court acted without reference to any guiding rules or principles, so that its ruling 

was so arbitrary or unreasonable as to be clearly wrong. Downer v. Aquamarine Operators, 

Inc., 701 S.W.2d 238, 241-42 (Tex. 1985); Zeptner v. Zeptner, 111 S.W.3d 727, 734 (Tex.

App.–Fort Worth 2003, no pet.) (op. on reh‟g). When the standard of review is abuse of 

discretion, legal and factual insufficiency are not independent grounds of error, but are relevant 

factors in assessing whether the trial court abused its discretion. See Beaumont Bank v. Buller, 

806 S.W.2d 223, 226 (Tex. 1991); Crawford v. Hope, 898 S.W.2d 937, 940 (Tex. App.–

Amarillo 1995, writ denied). Merely because a trial court may decide a matter within its 

discretion in a different manner than an appellate court would in similar circumstances does not 
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demonstrate an abuse of discretion. Downer, 701 S.W.2d at 242. To determine whether there 

has been an abuse of discretion because the evidence is legally or factually insufficient to support 

the trial court‟s decision, the appellate court conducts a two part inquiry: (1) did the trial court 

have sufficient evidence upon which to exercise its discretion, and (2) did the trial court err in the 

application of that discretion? In re T.D.C., 91 S.W.3d 865, 872 (Tex. App.–Fort Worth 2002, 

pet. denied) (op. on reh‟g).

When the burden of proof at trial is by clear and convincing evidence, we apply a higher 

standard of legal and factual review. In re J.F.C., 96 S.W.3d 256, 265-66 (Tex. 2002). Clear 

and convincing evidence is defined as 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 (Vernon Supp. 2009); Transp. Ins. Co. v. 

Moriel, 879 S.W.2d 10, 31 (Tex. 1994). It is an intermediate standard between the 

preponderance standard of civil proceedings and the beyond a reasonable doubt standard in 

criminal trials. In re G.M., 596 S.W.2d 846, 847 (Tex. 1980).

Applicable Law

Property possessed by either spouse during or on dissolution of the marriage is presumed 

to be community property, absent clear and convincing evidence to the contrary. TEX. FAM.

CODE ANN. § 3.003 (Vernon Supp. 2009). The Texas Family Code defines separate property as 

that property owned by a spouse before marriage, acquired during the marriage by gift, devise or 

descent. Id. § 3.001(1), (2) (Vernon Supp. 2009). The Family Code also defines as separate 

property “the recovery for personal injuries sustained by the spouse during marriage, except any 

recovery for loss of earning capacity during marriage.” Id. § 3.001(3) (Vernon 2006); see, e.g., 

Perez v. Perez, 587 S.W.2d 671, 673 (Tex. 1979). Portions of a personal injury award belonging 

to the community estate include damage for lost wages, medical expenses, and other expenses 

associated with injury to the community estate. See, e.g., Graham v. Franco, 488 S.W.2d 390, 

396 (Tex. 1972); Cottone v. Cottone, 122 S.W.3d 211, 213 (Tex. App.–Houston [1st Dist.] 2003, 

no pet.). “When a spouse receives a settlement from a lawsuit during marriage, some of which 

could be separate property and some of which could be community property, it is that spouse‟s 

burden to demonstrate which portion of the settlement is [his] separate property.” Licata v. 

Licata, 11 S.W.3d 269, 273 (Tex. App.–Houston [14th Dist.] 1999, pet. denied).
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The determination of whether property is separate because owned or acquired before 

marriage is governed by the inception of title doctrine. Smith v. Smith, 22 S.W.3d 140, 145 

(Tex. App.–Houston [14th Dist.] 2000, no pet.) (op. on reh‟g). Inception of title occurs when a 

party first has a right of claim to the property by virtue of which title is finally vested. Id. In 

order to overcome the community presumption, the burden is on the spouse claiming certain 

property as separate to trace and clearly identify the property claimed to be separate. Estate of 

Hanau v. Hanau, 730 S.W.2d 663, 667 (Tex. 1987). Separate property will retain its character 

through a series of exchanges so long as the party asserting separate ownership can overcome the 

presumption of community ownership by tracing the assets on hand during the marriage back to 

property that, because of the time and manner of its acquisition, is separate in character. 

Cockerham v. Cockerham, 527 S.W.2d 162, 168 (Tex. 1975). However, if separate and 

community property have been commingled so as to defy resegregation and identification, the 

community presumption prevails. Hanau, 730 S.W.2d at 667.

A trial court may not divest a spouse of his separate property. Eggemeyer v. Eggemeyer, 

554 S.W.2d 137, 142 (Tex. 1977). It is unnecessary to show harm, because divestiture of 

separate property requires reversal. See, e.g., Shestawy v. Shestawy, 150 S.W.3d 772, 780 (Tex. 

App.–San Antonio 2004, pet. denied).

Any doubt as to the character of property should be resolved in favor of the community 

estate. Akin v. Akin, 649 S.W.2d 700, 703 (Tex. Ap.–Fort Worth 1983, writ ref‟d n.r.e.).

The FELA Settlement

In his suit, James sought to recover damages for past and future lost wages, diminished 

earning capacity, past and future physical pain, physical impairment, and mental anguish, and 

past and future medical services and care. James settled all claims for $465,000.00. Damages 

for lost wages and diminished earning capacity are community property. Recovery for medical 

expenses incurred during marriage is community property. Id.; Graham, 488 S.W.2d at 396. 

Damages for personal injury are separate property. Perez, 587 S.W.2d at 673.

James contends the entire settlement was intended to compensate him for his personal 

injury; hence it is all his separate property. James signed several documents in connection with 

the settlement. James argues that a sentence in one of the documents supports his contention that 

the entire settlement was compensation for personal injury, and none of the money was for lost 

earnings or earning capacity. James relies on the following language in one of the settlement 
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documents: “For Railroad Retirement Act purposes, I agree the entire amount of this payment is 

apportioned to factors other than time lost; nevertheless, I understand this is a final payment and 

complete release and includes any claim I may have for time lost.” At the same time he signed 

the release, James signed an “Apportionment of Claim Settlement,” which recited that it was 

“[f]or the purpose of the Railroad Retirement Act, Railroad Unemployment Insurance Act and 

Railroad Retirement Tax Act. . . .” It also showed that the amount of the settlement was 

apportioned to “other than taxable time lost.” The document stated, “This apportionment and 

allocation is made solely for the purpose of determining creditable earnings and computing taxes 

under said Acts to provide for the reimbursement of the Railroad Retirement Board for the 

amount paid employee for sickness benefits.”

James signed a third document entitled “Agreement Not to Mark Up/Resignation” 

wherein he stated that he had agreed to

accept the settlement of his claims for personal injuries, disabilities and illnesses arising out of 

such events and circumstances more fully described in said Settlement and Release Agreement, 

and for any and all employment claims for personal injuries, disabilities and illnesses arising out 

of such events and circumstances more fully described in said Settlement and Release Agreement, 

and for any and all employment claims arising from my employment from the BURLINGTON 

NORTHERN AND SANTA FE RAILWAY COMPANY.

This document also stated, “I hereby assert and agree that said sums so paid me are based upon 

representations of such permanent disability that will forever prohibit and incapacitate me from 

returning to any railroad employment. . . .” James promised not to seek future employment with 

the railroads. He also confirmed that the agreement “includes a settlement and compromise of 

any and all claims that could have been or could be brought under the Railroad Labor Act. . . .”

We are not persuaded that the apportionment of the settlement to factors other than time 

lost establishes that it was intended solely as compensation for personal injury and therefore 

separate property. Read in their entirety, the documents show that “time lost” refers to the 

special meaning the term has in the calculation of the employee‟s retirement annuity and 

disability eligibility under the Railroad Retirement Act. The sentence James relies on clearly 

states that the apportionment is for “Railroad Retirement purposes” and concludes,

“Nevertheless, I understand that this a final payment and complete release and includes any 

claim I may have for lost time.” (Emphasis added). We conclude that, as the trial court found, 
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the allocation of the settlement “to other than „time lost‟ was meant only to avoid the 

consequences of an award for „time lost‟ under the Railroad Retirement Act.”

In accepting the settlement, James released a broad range of claims including community 

claims for lost employment, earning capacity, and medical expenses. In a separate document, he 

gave up any claim for future earning capacity “based upon representations of such permanent 

disability that will forever prohibit and incapacitate me from returning to any railroad 

employment. . . .” The trial court also found that the amount of the lump sum payment was 

approximately the amount he would have earned as a railroad employee had he continued with 

that employment from the date of the accident to the date he would be eligible to retire with 

benefits.

We believe that part of the settlement James received was in consideration of his release 

of community claims such as lost wages, diminished earning capacity, and medical expenses. 

Since the settlement included compensation for both community and separate claims, it was 

James‟s burden to establish, by clear and convincing evidence, what portion of the proceeds were 

separate property. See Cottone, 122 S.W.3d at 213. James failed to sustain his burden of 

demonstrating what part of the proceeds was community and what was separate. Instead, he 

insisted that the entire sum was separate property. Without clear and convincing evidence 

establishing what part of the settlement was separate property, the trial court correctly concluded 

that all of the settlement must be presumed to be community property. Licata, 11 S.W.3d at 273. 

Appellant‟s first issue is overruled.

Disability Policy Proceeds

James argues that he first purchased the disability policies prior to the marriage. He 

claims that under the inception of title doctrine, the character of the policies as separate property 

was fixed at the time he first executed the insurance agreements. Therefore, he contends that the 

total of $60,000 in monthly disability payments that he received during the marriage during the 

period he was unable to work is his separate property.

In its findings of fact made after the 2004 trial, the trial court found that “the Trustmark 

policy vested after the marriage of the parties.” It further concluded that “the payments under 

the policy are community property.”

The court granted a new trial solely on the issue of the characterization of the FELA 

settlement. At the hearing conducted on June 4, 2007, the parties agreed that court could take 
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judicial notice of the testimony and exhibits in the first trial. However, no record of those 

proceedings has been brought forward on appeal. The limited testimony adduced at the second 

(2007) hearing concerns evidence related only to the characterization of the FELA settlement. 

The monthly disability payments from Trustmark are not mentioned. After the 2007 hearing, the 

court made no findings of fact related to the Trustmark proceeds.

James‟s pleadings show that he purchased three disability policies prior to his marriage to 

Mary. But the policies state that they require renewal each month and that the period of 

insurance is one month. The maximum benefit under the policies was twenty-four months. All 

of the disability payments were paid during the marriage and were intended to replace earnings 

lost while James and Mary were married.

“If a person becomes disabled or injured, any disability payment or workers‟ 

compensation payment is community property to the extent it is intended to replace earnings lost 

while the disabled or injured person is married.” TEX. FAM. CODE ANN. § 3.008(b) (Vernon 

2006). The twenty-four monthly benefit payments of $2,500.00 totaling $60,000.00 are 

community property. Appellant‟s second issue is overruled.

DISPOSITION

The judgment is affirmed.

BILL BASS

 Justice

Opinion delivered July 30, 2010.

Panel consisted of Griffith, J., Hoyle, J., and Bass, Retired Justice, Twelfth Court of Appeals

sitting by assignment.

(PUBLISH)