Do you have actual fraud by a spouse against the community estate?
Under Texas law, a spouse commits fraud if that spouse transfers community property or expends community funds for the primary purpose of depriving the other spouse of the use and enjoyment of the assets involved in the transaction. Such fraud involves dishonesty of purpose or intent to deceive.
The question a spouse will need to answer to pursue a “fraud issue” in court is “did my spouse commit fraud with respect to my community property rights?
The next question will be to “how much in dollars was the loss, if any, suffered by the community estate of my spouse and me as a result of my spouse’s fraud?
In a divorce proceeding in a Texas family law court, a spouse is entitled to make moderate gifts, transfers, or expenditures of community property for just causes to a third party However, a gift, transfer, or expenditure of community property that is without moderation, excessive or arbitrary is unfair to the other spouse. Factors to be considered in determining the fairness of a gift, transfer, or expenditure under the Texas Pattern Jury Charges (PJC) are:
- The relationship between the spouse making the gift, transfer, or expenditure and the recipient.
- Whether there were any special circumstances tending to justify the gift, transfer or expenditure.
- Whether the community funds used for the gift, transfer, or expenditure were reasonable in proportion to the community estate remaining.
So, under current Texas law, entitled “Fraud on the Community; Division and Disposition of Reconstituted Estate, Texas Family Code section 7.009, this sections defines the reconstituted estate to mean the total value of the community estate that would exist if an actual or constructive fraud on the community had not occurred.
The Family Law Code furthers provides that (b) if the trier of fact determines that a spouse has committed actual or constructive fraud on the community, the court shall:
(1) Calculate the value by which the community estate was depleted as a result of the fraud on the community and calculate the amount of the reconstituted estate; and
(2) Divide the value of the reconstituted estate between the parties in a manner the court deems just and right.
To accomplish a “just and right” division of the community estate, the court may award a wronged spouse a money judgment and/or an appropriate share of the community estate.
Section 7.009 of the Texas Family Code states as follows:
(1) Awarding to the wronged spouse an appropriate share of the community estate remaining after the actual or constructive fraud on the community;
(2) Awarding a money judgment in favor of the wronged spouse against the spouse who committed the actual or constructive fraud on the community; or
(3) Awarding to the wronged spouse both a money judgment and an appropriate share of the community estate.
Section 7.009 of the Texas Family Code relates to fraud on the community. A spouse also has an independent cause of action for a “tortious wrong” by a spouse causing personal injury to the other spouse. In addition, by stating that a spouse cannot recover in tort for a deprivation of community assets as opposed to a tort committed against a spouse or his or her separate property, the Texas Courts has implied that a spouse may also sue the other spouse for tortious injury to the spouse’s separate estate.
In conclusion, the remedy for fraud on the community estate is a just and right property division upon divorce. However, an independent cause of action still exists for a tortious wrong by a spouse causing personal injury to the other spouse or tortious injury to the spouse’s separate estate. It is therefore important for family law attorneys to understand the current court decisions and the evolution of existing family law issues and the reasoning behind them.