Court Opinion

ID: 6499535
Source: CourtListenerOpinion
Date Created: 2022-07-13 06:10:15.696659+00
Date Added: 2024-06-11T15:54:32.850958
License: Public Domain

AFFIRMED and Opinion Filed July 7, 2022

                                    S  In The
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                No. 05-20-00787-CV

          IN THE INTEREST OF M.H.A, AND Z.H.A., CHILDREN

               On Appeal from the 296th Judicial District Court
                            Collin County, Texas
                   Trial Court Cause No. 296-53533-2018

                         MEMORANDUM OPINION
              Before Justices Partida-Kipness, Reichek, and Goldstein
                        Opinion by Justice Partida-Kipness
      In this divorce case, appellant Husband challenges a disproportionate division

of the marital estate in favor of Wife based on the finding that Husband committed

constructive fraud. He also disputes the trial court’s finding that he used his company

as his alter ego and the award of certain financial assets to Wife without evidence of

their valuation. We affirm the judgment in all respects.

                                   BACKGROUND

      Husband and Wife were married in 1997. In 2018, Husband filed for divorce.

He did not serve Wife with the petition, though, and he took a default judgment of

divorce against her that named him as sole managing conservator of their children

and awarded him nearly all the family property. Wife discovered Husband’s
maneuver and had the divorce decree set aside through a bill of review in 2020. She

counterpetitioned for divorce and sought a finding that Husband had committed

actual and constructive fraud on the marital estate through a series of dubious

financial transactions.

      At trial, much of the evidence focused on Husband’s withdrawals of

community funds and transfers of money, real property, and other community assets

to himself or his family members. Husband maintained that Wife knew about and

approved the withdrawals and transfers, many of which he testified were made for

legitimate family reasons. Other transfers, Husband explained, were made in

connection with his home-renovation business, Renaissance Rebuilding, LLC. Wife

denied that she had any foreknowledge of the transfers, testifying that she generally

left Husband in charge of the family’s finances. She disputed Husband’s

explanations for the transfers and stated her belief that Husband was hiding assets.

Wife also introduced evidence that showed Husband had received distributions from

an undisclosed IRA account, though Husband continued to deny that he had any such

account.

      After hearing the evidence, the trial court granted a divorce. The resulting

decree gave Wife a disproportionate share of the property division based in part on

Husband’s constructive fraud against the marital estate. Within the division, the trial

court awarded Wife all individual retirement accounts, pensions, annuities, and

annuity life insurance benefits in Husband’s name. The trial court rendered findings

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of fact and conclusions of law. Among them was a determination that Husband used

Renaissance as his alter ego and, as a result, a piece of real property belonging to

Renaissance could and should be awarded to Wife. Husband appeals.

                              STANDARD OF REVIEW

      We review the trial court’s division of a community estate for an abuse of

discretion. Slicker v. Slicker, 464 S.W.3d 850, 857 (Tex. App.—Dallas 2015, no

pet.). In family law cases, the abuse of discretion standard of review overlaps with

the traditional sufficiency standards of review. Id. As such, legal and factual

sufficiency are not independent grounds of reversible error but instead constitute

factors relevant to our assessment of whether the trial court abused its discretion. Id.

A trial court does not abuse its discretion for want of evidence if there is some

evidence of a substantive and probative character to support the decision. Id.

      In an appeal from a bench trial, we review a trial court’s conclusions of law

de novo and will uphold them on appeal if the judgment of divorce can be sustained

on any legal theory supported by the evidence. Reisler v. Reisler, 439 S.W.3d 615,

619 (Tex. App.—Dallas 2014, no pet). We review the trial court’s findings of fact

under the same standards for sufficiency that govern the review of jury findings,

giving deference to the trial court’s determination of the weight and credibility of

the evidence. Id. at 620. In evaluating a legal sufficiency challenge, we credit

evidence that supports the finding if a reasonable fact finder could, and disregard

contrary evidence unless a reasonable fact finder could not. Id.

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       A party seeking to disregard corporate formalities bears the burden of proving

that the company is an alter ego of another person or entity. Fuentes v. Zaragoza,

555 S.W.3d 141, 169 (Tex. App.—Houston [1st Dist.] 2018, no pet.). We review

conclusions of law regarding alter ego de novo to determine their correctness as

applied to the facts. Id. We review the evidence underlying findings of fact for legal

and factual sufficiency under the same standards applied in reviewing evidence

supporting a jury’s findings. Id. We sustain a no-evidence challenge when the record

reveals either (1) a complete absence of evidence of a vital fact, (2) the court is barred

by rules of law or 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 scintilla

of evidence, or (4) the evidence establishes conclusively the opposite of a vital

fact. Id.

                                       ANALYSIS

I.     Constructive Fraud

       In his first issue, Husband disputes the trial court’s decision to award Wife a

disproportionate share of the community estate based on its determination that

Husband committed constructive fraud. Husband contends that Wife introduced no

evidence of the kind that may sustain a constructive fraud finding.

       In a divorce decree, the trial court shall order a division of the marital estate

in a manner that the trial court deems just and right, having due regard for the rights

of each party. TEX. FAM. CODE § 7.001. The trial court is afforded broad discretion

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in dividing the community estate, and we must indulge every reasonable

presumption in favor of the trial court’s proper exercise of its discretion. In re

Marriage of C.A.S. & D.P.S., 405 S.W.3d 373, 384 (Tex. App.—Dallas 2013, no

pet.). The property division need not be equal, and a trial court may consider many

factors when exercising its discretion, id., including waste or fraud on the

community. Schlueter v. Schlueter, 975 S.W.2d 584, 589 (Tex. 1998).

      Fraud on the community can be actual or constructive. Strong v. Strong, 350

S.W.3d 759, 771 (Tex. App.—Dallas 2011, pet. denied). Constructive fraud may be

shown if one spouse unfairly deprives the other spouse of the benefit of community

property. Id. “A presumption of constructive fraud arises where one spouse disposes

of the other spouse’s interest in community property without the other spouse’s

knowledge or consent.” Id. If the presumption arises, the burden of proof then shifts

to the spouse who made the transfers to prove the fairness of the

disposition. Chatterjee v. Banerjea, No. 05-18-01035-CV, 2019 WL 3886655, at *5

(Tex. App.—Dallas Aug. 19, 2019, no pet.) (mem. op.). While waste claims are often

premised on specific transfers or gifts of community property to a third party, a waste

judgment can also be sustained by evidence of community funds unaccounted for by

the spouse in control of those funds. Wheeling v. Wheeling, 546 S.W.3d 216, 225

(Tex. App.—El Paso 2017, no pet.).

      According to Wife, Husband alone had managed the family finances, and

when the couple encountered difficulties in their relationship, he acted swiftly to

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shut off Wife’s access to family accounts and hide assets from her. Wife submitted

evidence that Husband had transferred over $300,000 of community funds to himself

or his relatives between 2017 and 2019. In all, she documented seven sizeable

transfers ranging from $12,300 to $102,406.03 over that period, along with other

smaller transfers. Wife denied that she had known of or consented to any of these

transfers. She conceded that much of the money came from her joint accounts with

Husband, but she maintained that she did not discover her name was on these joint

accounts until the divorce proceedings began. There was also evidence that Husband

had power of attorney for Wife, which he exploited in secreting the funds.

      Husband testified that Wife knew about and agreed to the transfers. He also

attempted to justify the transfers, explaining them as innocuous family expenses. For

instance, he testified that one of the transfers was used to renovate and furnish an

apartment for Wife and the children, while another was used to support his father in

Jordan. Two other transfers, he testified, were used to fund a family vacation and

Husband’s side business of renovating houses, both of which Wife knew of and

benefited from. More generally, Husband maintained that he was not a wasteful

person and that, at any rate, the family had too little money to permit wasteful use

of community funds.

      However, the trial court expressly found that Husband’s testimony was not

credible. Furthermore, Wife claimed to be unaware of the transfers and disputed

Husband’s explanations, and the trial court found her testimony to be credible. It

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was the trial court’s sole right to assess the parties’ credibility, and we defer to these

determinations on appeal.

      Because there was credible proof Husband had disposed of over $300,000 in

community property without Wife’s knowledge or consent, the evidence warranted

a presumption that Husband had committed constructive fraud. Husband offered no

credible evidence to rebut that presumption. The state of the evidence thus fully

supports the trial court’s determination that Husband constructively defrauded the

community estate. See In re D.V.D., No. 05-17-00268-CV, 2018 WL 2316014, at *7

(Tex. App.—Dallas May 22, 2018, no pet.) (mem. op.) (upholding a trial court’s

ruling on constructive fraud claim as a credibility determination in the face of

conflicting evidence); Strong, 350 S.W.3d at 771 (same).

      Husband, however, would require more. He contends that to sustain a finding

of constructive fraud, there must also be evidence of fraudulent intent. As support,

he relies on our sister court’s framing of the issue when it wrote, “[w]aste occurs

when one spouse, dishonestly or purposefully with the intent to deceive, deprives the

community estate of assets to the detriment of the other spouse.” Giesler v. Giesler,

No. 03-08-00734-CV, 2010 WL 2330362, at *3 (Tex. App.—Austin June 10, 2010,

no pet.) (mem. op.) (emphasis added).

      This argument is inconsistent with our precedent. “Constructive fraud does

not require a showing of fraudulent intent . . . .” Strong, 350 S.W.3d at 771; accord

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Puntarelli v. Peterson, 405 S.W.3d 131, 138 (Tex. App.—Houston [1st Dist.] 2013,

no pet.). Husband offers no reason to revisit Strong, and we decline to do so.

         Husband has not shown that the trial court abused its discretion in finding

constructive fraud. Accordingly, we overrule Father’s first issue.

II.      Alter Ego

         In his second and third issues, Husband challenges the trial court’s

determination that he used his company, Renaissance, as his alter ego. Based on this

determination, the trial court disregarded the company’s corporate form and awarded

real property belonging to the company to Wife. Husband maintains that this was

error.

         Under certain circumstances, a spouse may be able to reach the assets of the

other spouse’s separately owned corporation. Young v. Young, 168 S.W.3d 276, 281

(Tex. App.—Dallas 2005, no pet.). A finding of alter ego allows piercing of the

corporate veil. Id. Piercing the corporate veil, in turn, allows the trial court to

characterize as community property assets that would otherwise be the separate

property of a spouse. Id.

         In a divorce case, a finding of alter ego requires (1) unity between the separate

property corporation and the spouse such that the separateness has ceased to exist,

and (2) the spouse’s improper use of the corporation damaged the community estate

beyond that which might be remedied by a claim for reimbursement. Id. at 281–82.

The trial court must find something more than mere dominance of the corporation

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by the spouse. Lifshutz v. Lifshutz, 61 S.W.3d 511, 517 (Tex. App.—San Antonio

2001, pet. denied).

      In this case, the trial court made several factual findings that corresponded

with its ultimate alter ego determination. The trial court found that there was

extensive commingling of personal and company funds. According to the findings,

Husband was the sole member and owner of Renaissance, and he treated

Renaissance’s accounts as his personal accounts. He used company funds on

personal expenditures and financial transfers to family members, but he was unable

to provide any documentation to explain the company’s finances or justify its

expenses or transfers. Based on these facts, the trial court determined that Husband

used Renaissance as his alter ego.

      The record supports these findings. Renaissance’s bank statements show that

company money was regularly spent on personal purchases such as movies,

groceries, and liquor. The same statements showed that Husband often made four-

figure transfers to his brother in Jordan from company accounts, and it was

undisputed that those transfers had nothing to do with Renaissance’s business of

renovating houses. The statements show that around the time Husband filed for

divorce, he withdrew over $100,000 in community funds from the company’s

account, but he was unable to produce any credible evidence to explain where that

money had gone. The withdrawal left the company undercapitalized with just under

$19,000 in reserves available along with some property assets. The evidence

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reflected that Renaissance was a profitable enterprise in the years before the divorce,

but at the time of the divorce, Husband claimed that the business was defunct due to

lack of funding.

      In Young, we upheld an alter ego finding in a divorce case based on

comparable proof. See 168 S.W.3d at 283. We emphasized the husband’s

commingling of assets, his unexplained personal expenditures with company funds,

and that his actions left “a substantial amount of money unaccounted for.” Id.; see

Boyo v. Boyo, 196 S.W.3d 409, 421 (Tex. App.—Beaumont 2006, no pet.)

(upholding alter ego finding in a divorce case based on evidence of sole control,

commingling of assets, personal expenses paid with company funds, and

“questionable transfers” of community funds to family and friends through the

company). Much like here, the record in Young also contained evidence that the

husband earned several hundred thousand dollars through the business in the years

before the divorce, but at the time of the divorce, the husband claimed that he was

not working and that the company had no income. 168 S.W.3d at 283.

      This case calls for the same result as in Young. Viewing the evidence in the

light most favorable to Wife, we cannot hold that the evidence is legally insufficient

to support the trial court’s alter ego finding. See id. Accordingly, we overrule

Husband’s second and third issues.

                                        –10–
III.   Award of Retirement Accounts without Valuation Evidence

       In his fourth issue, Husband contends that the trial court abused its discretion

by awarding Wife the full value of all retirement accounts, pensions, annuities, and

annuity life insurance benefits that were in Husband’s name. Husband asserts that

there was no evidence as to the value of any such financial assets, and thus the trial

court acted arbitrarily in awarding those unknown assets to Wife.

       However, Husband provided no evidence concerning the existence or value

of these assets. “[W]hen a party does not provide values for property to be divided,

that party may not complain on appeal that the trial court lacked sufficient

information to properly divide the property.” Deltuva v. Deltuva, 113 S.W.3d 882,

887 (Tex. App.—Dallas 2003, no pet.) (op. on reh’g).

       Just the opposite, Husband insisted at trial that no such assets existed. During

his testimony, he was confronted with bank records showing that he had received

distributions from an undisclosed IRA account, but Husband continued to deny that

he had any IRA accounts. Based on this evidence, the trial court found that husband

failed to disclose an individual retirement account, deposits of which were evidenced

by a bank statement in his name. Further, the trial court deemed Husband’s

testimony not credible. The trial court awarded Wife a disproportionate division in

part because of what it termed Husband’s “fraudulent actions,” and one facet of that

division was awarding Wife all of Husband’s retirement accounts, pensions,

annuities, and annuity life insurance benefits, though their exact value and status was

                                         –11–
unknown. See Rafidi v. Rafidi, 718 S.W.2d 43, 45 (Tex. App.—Dallas 1986, no writ)

(approving similar measures where the husband’s stonewalling left “an unknown but

substantial amount” of financial assets that had not been “disclosed to the Court and

are unaccounted for”).

      Because Husband provided no information concerning the existence or value

of the assets in question and instead acted to frustrate legal inquiry into these assets,

he may not complain on appeal concerning deficiencies in their valuation and

division. We overrule Husband’s fourth issue.

                                     CONCLUSION

      Husband asserted that no evidence supports the findings that he committed

constructive fraud or used his company as an alter ego. The evidence supported these

determinations. Husband protested the valuation and division of certain financial

assets, but he may not complain about those decisions given that he provided no

information to address their valuation and worked to thwart their division.

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     Accordingly, we affirm the trial court’s judgment.

                                         /Robbie Partida-Kipness/
                                         ROBBIE PARTIDA-KIPNESS
                                         JUSTICE

200787F.P05

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                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

IN THE INTEREST OF M.H.A,                      On Appeal from the 296th Judicial
AND Z.H.A., CHILDREN                           District Court, Collin County, Texas
                                               Trial Court Cause No. 296-53533-
No. 05-20-00787-CV                             2018.
                                               Opinion delivered by Justice Partida-
                                               Kipness. Justices Reichek and
                                               Goldstein participating.

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

      It is ORDERED that appellee Mervant Abufaris recover her costs of this
appeal from appellant Husny Amerih.

Judgment entered this 7th day of July, 2022.

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