Case Name: J. Hudson SCHLUETER and Richard Stephen Schlueter, Petitioners, v. Karen Sue SCHLUETER, Respondent
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1998-07-03
Citations: 975 S.W.2d 584
Docket Number: No. 96-1091
Parties: J. Hudson SCHLUETER and Richard Stephen Schlueter, Petitioners, v. Karen Sue SCHLUETER, Respondent.
Judges: in which ENOCH, OWEN, BAKER, ABBOTT and HANKINSON, Justices, joined.
Reporter: South Western Reporter Second Series
Volume: 975
Pages: 584–593

Head Matter:
J. Hudson SCHLUETER and Richard Stephen Schlueter, Petitioners, v. Karen Sue SCHLUETER, Respondent.
No. 96-1091.
Supreme Court of Texas.
Argued Oct. 7, 1997.
Decided July 3, 1998.
Rehearing Overruled Oct. 15, 1998.
Thomas M. Alvis, Philip C. Friday, Jr., Kristen A. Algert, Austin, for Petitioners.
John F. Campbell, Mark W. Clemens, Austin, for Respondent.

Opinion:
GONZALEZ, Justice,
delivered the opinion of the Court,
in which ENOCH, OWEN, BAKER, ABBOTT and HANKINSON, Justices, joined.
This divorce case answers the question of what remedies are available to a spouse alleging fraud on the community committed by the other spouse. The husband transferred various community assets to his father shortly before he filed for divorce. The wife counterclaimed for divorce and brought independent tort claims against her husband and father-in-law, seeking damages for fraud, breach of fiduciary duty, and conspiracy. Based on favorable jury findings, the trial court ordered a disproportionate division of the community estate favoring the wife, and rendered judgment for the wife against the husband and his father for actual and exemplary damages. Holding that a tort cause of action for fraud on the community exists independent of a divorce proceeding, the court of appeals affirmed. 929 S.W.2d 94. We granted writ to resolve a conflict among courts of appeals. Because a wronged spouse has an adequate remedy for fraud on the community through the "just and right" property division upon divorce, we hold that there is no independent tort cause of action between spouses for damages to the community estate. Accordingly, we reverse the judgment against the husband and remand for a new division of the marital estate. We affirm the remainder of the court of appeals' judgment.
I
Richard and Karen Schlueter married in 1969. In December 1992, Mr. Schlueter began investing in emus. He contributed $3250 of community funds toward two pairs of the birds, but eventually sold his interest to his father, Hudson Schlueter, for $1,000. The emu business was worth at least $10,000 when the sale occurred. Mrs. Schlueter did not know the details of the business and did not find out that her husband had sold his interest to her father-in-law until after Mr. Schlueter filed for divorce.
Shortly before he filed for divorce, Mr. Schlueter accepted a $30,360.41 check from his employer as an incentive for early retirement. Mr. Schlueter turned the cheek over to his father for deposit in his father's account. His father then wrote himself a check for $12,565, allegedly to reimburse past loans to Mr. Schlueter. About a week later, Mr. Schlueter filed for divorce.
Mrs. Schlueter counterclaimed for divorce and added independent tort claims against her husband and father-in-law for fraud, breach of fiduciary duty, and conspiracy. All of Mrs. Schlueter's claims against her husband and father-in-law involve their depriving the Sehlueters' community estate of assets. Mrs. Schlueter makes no claim that she was deprived of her separate property.
The jury heard the fraud and conspiracy claims in a bifurcated trial. The jury found that Mr. Schlueter committed actual and constructive fraud in dealing with the community assets, that he and his father had fraudulently transferred assets between them, and that they had engaged in a civil conspiracy to injure Mrs. Schlueter. The jury found that $12,850 would compensate the community for Mr. Schlueter's and his father's actions. It found that $35,000 would compensate the community for damage caused by the conspiracy. Finally, the jury found that Mr. Schlueter should pay $50,000 and his father $15,000 in exemplary damages.
At a later date, the trial court heard the divorce action without a jury, divided the marital assets, and rendered judgment on the jury verdict against Mr. Schlueter and his father jointly and severally for $12,850. In its Findings of Fact, the trial court determined that the joint and several judgment was part of the community estate. The court also awarded Mrs. Schlueter $30,000 in exemplary damages against her husband and $15,000 in exemplary damages against her father-in-law, and awarded Mrs. Schlueter $18,500 from her husband for attorney's fees on appeal.
The court of appeals affirmed. The court held that a spouse may bring an independent tort claim against the other spouse for fraud for which exemplary damages may be awarded, even when the fraud resulted only in a depletion of community assets and not the wronged spouse's separate estate. 929 S.W.2d at 99-100. The court of appeals based its holding on this Court's abrogation of the doctrine of interspousal immunity in the Bounds, Pnce, and Twyman decisions, and concluded that a person may bring any cause of action against his or her spouse. 929 S.W.2d at 99-100 (construing Twyman v. Twyman, 855 S.W.2d 619, 624 (Tex.1993); Price v. Price, 732 S.W.2d 316, 319 (Tex. 1987); and Bounds v. Caudle, 560 S.W.2d 925, 927 (Tex.1977)). The court of appeals also affirmed the judgment against the father-in-law, holding that the trial court had not abused its discretion in admitting into evidence a copy of a divorce decree involving Mr. Sehlueter's brother.
Relying on Belz v. Belz, 667 S.W.2d 240, 247 (Tex.App.—Dallas 1984, writ ref'd n.r.e.), and In re Marriage of Moore, 890 S.W.2d 821, 829 (Tex.App.—Amarillo 1994, no writ), Mr. Schlueter alleges that the court of appeals committed reversible error in recognizing a separate cause of action for fraud on the community. Mr. Schlueter and his father, in the father's only point of error, also assert that the court of appeals erred in holding that the trial court did not abuse its discretion in admitting into evidence a copy of the decree from Mr. Schlueter's brother's divorce.
II
The court of appeals reads the Twyman, Pnce, and Bounds decisions too broadly; these decisions do not control this case. In Bounds, we dealt with whether the inter-spousal immunity doctrine prevented a deceased woman's children from suing then-stepfather for their mother's wrongful death. Bounds, 560 S.W.2d at 925. The stepfather had allegedly shot and killed his wife. We concluded that interspousal immunity should be abolished for willful or intentional torts. Id. at 926-27. From a policy perspective, we stated that suits for willful and intentional torts such as the physical attack in that case would not disrupt domestic tranquility in "a home which has already been strained to the point where an intentional physical attack could take place." Id. at 927.
We re-examined the doctrine in Price v. Price, 732 S.W.2d 316 (Tex.1987). A wife sued her husband for negligence in causing her injuries in a motorcycle accident. Again this Court considered and rejected the argument that "peace and harmony" in the home would be damaged by suits between spouses, commenting that "[i]t is difficult to fathom how denying a forum for the redress of any wrong could be said to encourage domestic tranquility." Id. at 318. We followed up on our holding in Bounds by stating, "We now abolish [the interspousal immunity doctrine] completely as to any cause of action. We do not limit our holding to suits involving vehicular accidents only." Id. at 319.
Finally, in Twyman, we expressly adopted the tort of intentional infliction of emotional distress, and a plurality held that such a claim could be brought in a divorce proceeding. Twyman, 855 S.W.2d at 622, 624-26. The plurality noted that under Bounds and Price, there was no legal impediment to bringing a tort claim in a divorce action "based on either negligence or an intentional act such as assault or battery." Twyman, 855 S.W.2d at 624. Of course, by its facts, Twyman expanded that statement by allowing an intentional tort claim for emotional distress, which does not necessarily involve the physical aspects of assault or battery.
The salient characteristic distinguishing Bounds, Price, and Twyman from the case before us is that all three involved personal injury tort claims. Twyman, 855 S.W.2d at 621 (intentional infliction of emotional distress); Price, 732 S.W.2d at 316 (negligence claim for personal injuries); Bounds, 560 S.W.2d at 926 (wrongful death). Cf. Cleaver v. George Staton Co., Inc., 908 S.W.2d 468, 471 n. 2 (Tex.App.—Tyler 1995, writ denied) (distinguishing Twyman, which involved outrageous spousal conduct, and noting that the trial court could sort out the husband's claims against wife for breach of fiduciary duty and fraud on community estate in the property division, not by a separate cause of action). In discussing the potential for double recovery in Twyman, the Court pointed out that recovery for personal injuries of a spouse, including pain and suffering, is the separate property of the injured spouse, and therefore does not add to the marital estate. Twyman, 855 S.W.2d at 625 n. 20 (citing Tex. Fam.Code § 5.01(a)(3) (Act of May 31, 1969, 61st Leg., R.S., ch. 888, 1969 Tex. Gen. Laws 2707, 2726, repealed by Act of April 3, 1997, 75 th Leg., R.S., ch. 7, § 3, 1997 Tex. Gen. Laws 8, 43)) (current version at Tex. Fam. Code Ann. § 3.001(3)).
Likewise, in response to the concern that interspousal suits would result in fraud and collusion between the participants, the Price court stated, "we are unable to distinguish interspousal suits from other actions for personal injury." Price, 732 S.W.2d at 318. Therefore, despite its broad language stating that the Court was abolishing the interspousal immunity doctrine "completely as to any cause of action," id. at 319, the action in Price was one for personal injury, for which any recovery would be separate property of the injured spouse.
Moreover, a factor in Price that weighed heavily toward abolishing interspousal immunity "as to any cause of action" was the need to remedy the problem of denying a litigant a forum for the redress of a wrong. Id. at 318-19. The Court summed up the holding by saying that the result in the case was "compelled by the fundamental proposition of public policy that the courts should afford [such] redress." Id. at 320. However, redress is available in the present case without the creation of a separate tort cause of action between spouses.
Mrs. Schlueter sued her husband for improperly depleting community assets. This state's community property system provides that upon divorce, the trial court must enter a division of a married couple's estate "in a manner that the court deems just and right," considering the rights of the parties and any children of the marriage. Tex. Fam.Code Ann. § 7.001. Such a standard may at times lead to a disproportionate division of assets and liabilities of the parties, depending on the circumstances that courts may consider in refusing to divide the marital estate equally.
As this Court stated in Cameron v. Cameron, 641 S.W.2d 210, 223 (Tex.1982), "Community property owes its existence to the legal fact of marriage, and when the parties to that compact determine their relationship should end, property acquired during marriage is and should be divided among them in a just and right manner." This is distinguishable from recovery of separate property through an independent tort, which we allowed in Twyman, because "separate property . owes its existence to wholly extramarital factors, things unrelated to the marriage. In relation to that property, the parties are, in essence, strangers; they are separate." Cameron, 641 S.W.2d at 223. With these differences in mind, we hold that the well-developed "just and right" standard should continue to be the sole method used to account for and divide community property upon divorce.
Of course, there are also aspects of this state's community property system that provide additional remedies against a spouse for improper conduct involving the community estate. Texas recognizes the concept of fraud on the community, which is a wrong by one spouse that the court may consider in its division of the estate of the parties and that may justify an unequal division of the property. See Belz v. Belz, 667 S.W.2d 240, 247 (Tex.App.—Dallas 1984, writ ref'd n.r.e.). As the court in Belz aptly described it:
[A] claim of fraud on the community is a means to an end, either to recover specific property wrongfully conveyed, . or . to obtain a greater share of the community estate upon divorce, in order to compensate the wronged spouse for his or her lost interest in the community estate.
Id. at 246-47. Just as in the present case, Belz involved alleged intentional deprivation of the wife's share of community assets. Nevertheless, despite the intentional nature of the claim, because the fraud was perpetrated on the community, the court correctly distinguished it from eases involving personal injuries for which recovery belongs to the separate estate. Id. at 246.
Additionally, it is well settled that a trial court may award a money judgment to one spouse against the other in order to achieve an equitable division of the community estate. See Murff v. Murff, 615 S.W.2d 696, 699 (Tex.1981) (allowing money judgment against husband in division of community property where he had substantial sums in savings before separation that had disappeared by the time of trial). Of course, the money judgment can only be used as a means for the wronged spouse to recoup the value of his or her share of the community estate lost through the wrongdoer spouse's actions. See Mazique v. Mazique, 742 S.W.2d 805, 808 (Tex.App.—Houston [1st Dist.] 1987, no writ). Because the amount of the judgment is directly referable to a specific value of lost community property, it will never exceed the total value of the community estate. Still, a sound policy in favor of the wronged spouse is advanced: he or she should not suffer just because when it is time to divide the community, the other spouse has depleted the estate such that there is not enough money or property left to effect a just and right division.
The case of In re Marriage of Moore, 890 S.W.2d 821 (Tex.App.—Amarillo 1994, no writ), illustrates this aspect of marital property law. Mr. Moore filed for divorce, and Mrs. Moore counterclaimed for divorce and sought actual and exemplary damages for breach of fiduciary duty to the community estate. Id. at 825. Among other things, she alleged that Mr. Moore had conveyed community property to third parties in breach of his fiduciary duty not to commit fraud on the community. Id. at 825-26. The trial court found that Mr. Moore had breached his fiduciary duty, and assessed damages against him separate from the division of the marital estate. Id. at 825. Absent a voluntary re-mittitur by Mrs. Moore of the damages for breach of fiduciary duty, the court of appeals held that it would remand to the trial court for a new property division. Id. at 843.
The court correctly said:
[A] trial court may award a money judgment to one spouse, even as damages for the other spouse's fraud on the community. However, that type of personal judgment is merely a means for recouping the defrauded spouse's share of the community property lost as a result of the wrongdoing spouse's breach of the trust relationship. Such a recovery is not awarded as "separate damages" for an independent cause of action.
Id. at 828 (citations omitted). The court concluded that the only recourse available to Mrs. Moore for Mr. Moore's breach of fiduciary duty to the community estate was an action for fraud on the community. Id. at 827. The court of appeals correctly determined that no independent cause of action exists in Texas to recover separate damages when the wrongful act defrauded the community estate. Id. at 829.
Trial courts also have wide discretion and are allowed to take many factors into consideration in making a just and right division, see Murff, 615 S.W.2d at 698-99, including wasting of community assets. See Barbara Anne Kazen, Division of Property at the Time of Divorce, 49 Baylor L.Rev. 417, 424-28 (1997) (discussing factors that may be considered by a trial court in effecting a just and right property division). This too allows injured spouses like Mrs. Schlueter to recover her appropriate share of not only that property existing in the community at the time of divorce, but also that which was improperly depleted from the community estate. Waste of community assets is similar to the allegations against the husband here: that without the wife's knowledge or consent, he wrongfully depleted the community of assets of which Mrs. Schlueter was entitled a share. Such behavior is properly considered when dividing a community estate.
Mrs. Schlueter argues that allowing a separate tort cause of action for actual fraud is necessary so that exemplary damages may be awarded for the intentional acts of the wrongdoer spouse. However, heightened culpability does not change the essential character of the wrong: a deprivation of community assets as opposed to a tort committed against a person or his or her separate property. As discussed, the "just and right" standard with accompanying consideration of a wrongdoer spouse's fraud on community assets provides wronged spouses such as Mrs. Schlueter with redress. Moreover, as we have previously held, "recovery of punitive damages requires a finding of an independent tort with accompanying actual damages." Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex.1995); Federal Express Corp. v. Dutschmann, 846 S.W.2d 282, 284 (Tex.1993); cf. Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex.1981) (explaining in breach of contract action that even if breach is malicious, intentional, or capricious, punitive damages not recoverable without a tort). Because of our holding in the present ease that there is no independent tort cause of action for wrongful disposition by a spouse of community assets, the wronged spouse may not recover punitive damages from the other spouse.
However, despite the inappropriateness of punitive damages, it is a logical extension of a standard that calls for a "just and right" division to allow the court to consider that a spouse not only deprived the community of assets to the detriment of the other spouse, but may have done so with dishonesty of purpose or intent to deceive. See Land v. Marshall, 426 S.W.2d 841, 846 n. 3 (Tex.1968). This is the culpability needed for actual fraud on the community, which is one of the allegations by Mrs. Schlueter against Mr. Schlueter. Therefore, while we hold that a separate and independent tort action for actual fraud and accompanying exemplary damages against one's spouse do not exist in the context of a deprivation of community assets, if the wronged spouse can prove the heightened culpability of actual fraud, the trial court may consider it in the property division.
III
With regard to the causes of action against Mr. Schlueter's father, he has not argued that these separate and independent tort claims against him as a third-party defendant should also be abolished. Therefore, we do not reach that issue. We note that the trial court's $12,850 judgment of actual damages against Mrs. Schlueter's father-in-law was awarded to the community estate. That judgment represents an asset returned to the community estate, making it monetarily whole. Therefore, the trial court, in its just and right division, may not effect a disproportionate property division solely to make up for that formerly lost asset. However, as we have already discussed, the trial court may take into account Mr. Schlueter's conduct that resulted in a defrauding of the community estate.
IV
As previously noted, both Mr. Schlueter and Mr. Schlueter's father, in his only point of error, assert that the trial court committed reversible error in admitting evidence regarding prior acts by Mr. Schlueter's father involving his other son's divorce. We conclude that the court of appeals has correctly decided this issue. 929 S.W.2d at 97-99.
V
Finally, Mr. Schlueter complains that the trial court's award of $18,500 to Mrs. Schlueter for attorney's fees on appeal was erroneous because the trial court had previously instructed the jury that it could consider attorney's fees as part of its exemplary damages award against him. Therefore, he argues that a separate attorney's fees award amounts to a double recovery. Because we have reversed the exemplary damage award against him, there is no possibility of double recovery, and we need not consider this argument.
However, a party should not be penalized for taking a successful appeal. Because we have reversed the damages award against Mr. Schlueter, we also reverse the award for attorney's fees on appeal.
For all the foregoing reasons, we reverse the court of appeals' judgment against Richard Schlueter for actual and exemplary damages, and attorney's fees on appeal, and remand this cause to the trial court for a new property division. We affirm the remainder of the court of appeals' judgment.
.For a thorough discussion of issues relevant to this case, see Bradley L. Adams, The Doctrine of Fraud on the Community, 49 Baylor L.Rev. 445, 450-64 (1997).
1. Bounds v. Caudle, 560 S.W.2d 925 (Tex.1977).