in the Matter of the Marriage of Lisa Marie McNelly and Stephen E. McNelly and in the Interest of A.M.M, a Child ( 2014 )

Affirmed in part; Reversed in part; and Memorandum Opinion filed May 15,
2014.
In The
Fourteenth Court of Appeals
NO. 14-13-00281-CV
IN THE MATTER OF THE MARRIAGE OF LISA MARIE MCNELLY
AND STEPHEN E. MCNELLY AND IN THE INTEREST OF A.M.M, A
CHILD
On Appeal from the 18th District Court
Somervell County, Texas
Trial Court Cause No. DO4838
MEMORANDUM OPINION
In this divorce suit between Stephen E. McNelly and Lisa Marie McNelly,
Mr. McNelly challenges the trial court’s divorce decree in five issues. First, Mr.
McNelly alleges that the trial court erred when it characterized as community
property the proceeds from the sale of his separate-property business that were
deposited into joint accounts at brokerage firms. Second, Mr. McNelly alleges that
the trial court erred when it characterized certain paintings as community property.
Third, Mr. McNelly alleges that the trial court erred when it awarded Mrs.
McNelly a $60,000 judgment because the couple’s premarital agreement
proscribed reimbursement awards. Fourth, Mr. McNelly alleges that the trial court
erred when it declined to award him attorney fees. Lastly, Mr. McNelly alleges that
the trial court erred when it declined to impose a geographic restriction on Mrs.
McNelly, the primary joint managing conservator. We affirm in part and reverse
and remand in part.1
FACTS AND PROCEDURAL BACKGROUND
We present only the basic facts here, reserving detailed presentation of the
facts for our discussion of each issue. Mr. McNelly and Mrs. McNelly executed a
premarital agreement on July 17, 2008 and were married on July 22, 2008. Mrs.
McNelly had a daughter, A.M.M., from a previous relationship. Mr. McNelly
adopted A.M.M. in May 2010. When Mr. McNelly and Mrs. McNelly married, Mr.
McNelly owned and operated Rockin R Gasworks. The couple owned real and
personal property prior to the marriage, and they accumulated various items of
personal property during the marriage.
Mrs. McNelly filed a petition for divorce on November 29, 2010. Mr.
McNelly answered on December 7, 2010 and filed a counter-petition for divorce
on December 22, 2010. The couple presented their respective cases to the trial
court, and the trial court signed a final decree of divorce on November 21, 2012.
On December 21, 2012, Mrs. McNelly and Mr. McNelly filed separate motions for
new trial, both of which were denied. The trial court signed findings of fact and
conclusions of law on January 23, 2013. On February 19, 2013, Mr. McNelly
1
This case was transferred to our court from the Fort Worth Court of Appeals; therefore,
we must decide the case in accordance with its precedent if our decision would otherwise be
inconsistent with its precedent. See Tex. R. App. P. 41.3.
2
timely filed his notice of appeal.
DISCUSSION
I. Whether the trial court abused its discretion when, as a result of its
interpretation of the couple’s premarital agreement, it characterized as
community property the proceeds from the sale of Mr. McNelly’s
business that were deposited into joint brokerage accounts.
The trial court found that Mr. McNelly owned and operated Rockin R
Gasworks prior to the marriage, making Mr. McNelly’s interest in Rockin R
Gasworks separate property. See Tex. Const. art. XVI, § 15; Tex. Fam. Code Ann.
§ 3.001 (defining separate property), § 3.002 (defining community property) (West
2006). In September 2008, Mr. McNelly sold his interest in Rockin R Gasworks
for $1.3 million, and the couple deposited the proceeds into several accounts held
at several different financial institutions. Of the $1.3 million, $50,000 was
deposited into a Wells Fargo joint savings account. Another $50,000 was deposited
into a Wells Fargo joint checking account. The character of the $100,000 deposited
into the Wells Fargo accounts is not at issue in this case. Of the remaining $1.2
million, $600,000 was deposited into a brokerage account with Charles Schwab &
Co., Inc. (“Schwab”), and $600,000 was deposited into a brokerage account with
Fidelity Brokerage Services, LLC (“Fidelity”). Schwab and Fidelity are broker-
dealers registered with the Securities Exchange Commission. See Annual Audited
Report for Period Beginning 1/1/13 and Ending 12/31/13, Fidelity Brokerage Services,
LLC, at 3, http://www.sec.gov/Archives/edgar/vprr/14/9999999997-14-001816; Annual
Audited Report for Period Beginning 01/01/12 and Ending 12/31/12, Charles Schwab &
Co, Inc., at 3, http://www.sec.gov/Archives/edgar/vprr/13/9999999997-13-002328. The
trial court’s characterization of the deposits into the Fidelity and Schwab accounts
is at issue in this case.
3
The trial court concluded that “[t]he parties . . . converted separate property
funds, i.e., the $1,300,000 received by Stephen E. McNelly from the sale of Rockin
R Gasworks, to community property.” This conversion “was accomplished by the
deposit of funds received by Stephen R. [sic] McNelly from the sale of his separate
property business into joint accounts pursuant to the prenuptial agreement
executed by Lisa Marie McNelly and Stephen E. McNelly on July 17, 2008, and
the comingling of said funds with other community funds.” (emphasis added). Mr.
McNelly argues that the trial court divested him of his separate property when it
characterized the $1.2 million deposited into joint “brokerage” accounts as
community property. Mrs. McNelly responds that the court properly characterized
the disputed funds as community property because they were deposited into joint
“bank” accounts.
Courts employ a two-part test when reviewing alleged characterization
errors. See Jurek v. Couch-Jurek, 296 S.W.3d 864, 873 (Tex. App.—El Paso 2009,
no pet.). Application of this test requires both a showing of error and a showing
that the error was harmful. Id.; see Boyd v. Boyd, 131 S.W.3d 605, 617–18 (Tex.
App.—Fort Worth 2004, no pet.). A characterization error is harmful if it causes
the trial court to abuse its discretion in dividing the community estate. Jurek, 296
S.W.3d at 873; Boyd, 131 S.W.3d at 617.
To determine whether the trial court erred in this case, we must ascertain the
effect of the premarital agreement on the couple’s property interests.2 Courts
interpret premarital agreements like other written contracts. Williams v. Williams,
246 S.W.3d 207, 210 (Tex. App.—Houston [14th Dist.] 2007, no pet.); see
McClary v. Thompson, 65 S.W.3d 829, 837 (Tex. App.—Fort Worth 2002, pet.
2
We note that neither party contends on appeal that the premarital agreement is invalid or
is not binding.
4
denied). The court’s primary concern is ascertaining the intent of the parties as
expressed in the instrument. Reeder v. Wood Cnty. Energy, LLC, 395 S.W.3d 789,
794 (Tex. 2012). All contractual provisions must be considered with reference to
the whole instrument. Williams, 246 S.W.3d at 210. Contract terms are given their
plain and ordinary meaning unless the instrument indicates the parties intended a
different meaning. Reeder, 395 S.W.3d at 794–95. The parties’ intent is governed
by what is in the contract, not by what one party contends it intended but failed to
say and not by whether the contract was wisely made. U.S. Denro Steels, Inc. v.
Lieck, 342 S.W.3d 677, 682 (Tex. App.—Houston [14th Dist.] 2011, pet. denied);
Jamestown Partners, L.P. v. City of Fort Worth, 83 S.W.3d 376, 382 (Tex. App.—
Fort Worth 2002, pet. denied). The court cannot rewrite or add to the contract’s
language. Am. Mfrs. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex. 2003). Courts
construe marital property agreements narrowly in favor of the community estate.
Fischer-Stoker v. Stoker, 174 S.W.3d 272, 278–79 (Tex. App.—Houston [1st
Dist.] 2005, pet. denied).
Although neither party contends on appeal that the premarital agreement is
ambiguous, the question of a contract’s ambiguity is one of law for the court to
decide by looking at the contract as a whole in light of the circumstances present
when the contract was entered. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907
S.W.2d 517, 520 (Tex. 1995) (per curiam); May v. Buck, 375 S.W.3d 568, 579
(Tex. App.—Dallas 2012, no pet.) (court can conclude contract is ambiguous even
in absence of such a pleading by either party); see also Mescalero Energy, Inc. v.
Underwriters Indem. Gen. Agency, Inc., 56 S.W.3d 313, 322–323 (Tex. App.—
Houston [1st Dist.] 2001, pet. denied) (whether a term on its face is subject to two
or more interpretations is an argument of patent ambiguity). When a potential
ambiguity arises, deciding whether the language is ambiguous is an issue of
5
contract interpretation. Burlington N. & Santa Fe Ry. Co. v. S. Plains Switching,
Ltd., 174 S.W.3d 348, 356 (Tex. App.—Fort Worth 2005, no pet.). Parol evidence
is not admissible for the purpose of creating an ambiguity. Id. at 358. A contract is
not ambiguous when the language can be given a definite or certain meaning as a
matter of law. See Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861
(Tex. 2000); Nat’l Union Fire Ins. Co., 907 S.W.2d at 520; Burlington, 174
S.W.3d at 356. We will not find an ambiguity simply because the parties disagree
about the contract’s meaning. FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P.,
— S.W.3d —, No. 11-0050, 2014 WL 1133329, at *3 (Tex. March 21, 2014). If
the written instrument permits the court to ascertain a definite interpretation as to
which one of two possible meanings is proper, the contract is not ambiguous, and
the court will interpret the contract as a matter of law. Williams, 246 S.W.3d at
211; Burlington, 174 S.W.3d at 356 (citing R&P Enters. v. LaGuarta, Gavrel &
Kirk, Inc., 596 S.W.2d 517, 518–19 (Tex. 1980)). If the meaning of a contract is
uncertain and doubtful or reasonably susceptible to more than one meaning,
however, the contract is ambiguous and its meaning must be resolved by the
factfinder. Williams, 246 S.W.3d at 211; Burlington, 174 S.W.3d at 356. The
construction of an unambiguous contract is a question of law for the court and is
reviewed de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d
647, 650–51 (Tex. 1999).
The relevant portions of the premarital agreement provide:
Art. II.A(1): Separate Property. Unless otherwise specified in
this Agreement and the Schedules hereto, the
following shall apply: Any interest in real and
personal property, as described in the attached
Schedules, that each Party owned prior to
marriage, and any mutations thereof, shall remain
that Party’s separate property after the date
marriage.
6
Art. II.A(4): The following property, and any mutations thereof,
shall remain the separate property of the party
owning the original separate property: (a) Property
that is traceable to separate property owned before
marriage; (b) Property that is acquired during the
marriage from separate property funds alone; (c)
Property that is received in exchange for separate
property; (d) Property that is purchased with
proceeds of sale of separate property; (e) Increases
in value of separate property owned before
marriage, purchased with separate property or
exchanged for separate property.
Art. II.D: Joint Checking Account. The Parties further
understand and agree that funds acquired in the
future may be deposited into any bank account
styled in their joint names. In this event the parties
intend that any such monies placed in such an
account shall become and remain community
property.
Ascertaining the agreement’s effect hinges on our interpretation of the undefined
term “bank” in article II.D. For the following reasons, we find that the premarital
agreement in this case is not ambiguous and that the term “bank” does not include
brokerage firms.
First, the agreement expresses the parties’ intent to retain the separate-
property character of their already-existing separate property. This intent is evident
in Recital 7:
[T]he parties intend that all income arising from [Mr. McNelly’s]
separate property, and all of the fruits of his time toil, talent and labor
shall be the separate property of [Mr. McNelly] and shall remain
under the sole ownership, management, and control of [Mr. McNelly]
during this marriage, as well as upon dissolution of this marriage by
death, divorce, or annulment, unless such separate property is
otherwise transferred to [Mrs. McNelly] by will or other written
instrument voluntarily executed by [Mr. McNelly].
7
See All Metals Fabricating, Inc. v. Ramer Concrete, Inc., 338 S.W.3d 557, 561
(Tex. App.—El Paso 2009, no pet.) (recitals are useful in construing the contract
and determining the parties’ intent); Burlington, 174 S.W.3d at 356 (court must
consider the entire instrument so that no provision will be rendered meaningless).
Mr. McNelly’s interest in Rockin R Gasworks was separate property. The couple
intended that the fruits of the business, such as the earnings that might result from
the sale of the business, should remain Mr. McNelly’s separate property.
Second, the plain meaning of the term “bank” in article II.D does not
encompass brokerage firms. When a contract leaves a term undefined, we presume
that the parties intended its plain, generally accepted meaning. Epps v. Fowler, 351
S.W.3d 862, 866 (Tex. 2011). To ascertain the natural meaning of a common-
usage term, courts often consult dictionaries. Id. Webster’s Dictionary defines
“bank” as “an establishment for the custody, loan, exchange, or issue of money, for
the extension of credit, and for facilitating the transmission of funds by drafts or
bills of exchange.” Webster’s Third New Int’l Dictionary 172 (1993). Black’s Law
Dictionary similarly defines “bank” as “a financial establishment for the deposit,
loan, exchange, or issue of money and for the transmission of funds.” Black’s Law
Dictionary 164–65 (9th Ed. 2009). On the other hand, Webster’s Dictionary
defines “broker” as an “agent middleman who for a fee or commission negotiates
contracts of purchase and sale (as of real estate, commodities, or securities)
between buyers and sellers without himself taking title to that which is the subject
of negotiations and usu[ally] without having physical possession of it.” Webster’s
Third New Int’l Dictionary 281–82 (1993). A “broker,” according to Black’s Law
Dictionary, is “an agent who acts as an intermediary or negotiator, esp[ecially]
between prospective buyers and sellers; a person employed to make bargains and
contracts between other persons in matters of trade, commerce, or navigation.”
8
Black’s Law Dictionary 219–20 (9th ed. 2009). A “broker-dealer” is “a brokerage
firm that engages in the business of trading securities for its own account before
selling them to customers.” Id. These definitions illustrate that banks and brokers
are distinguishable, particularly with respect to the scope of their respective
services; banks tend to offer a broader spectrum of financial services than
brokerage firms.
Third, federal and state statutory definitions illustrate that banks and
brokerage firms generally fall under distinct statutory and regulatory regimes,
though under limited circumstances, banks are permitted to provide brokerage
services. See Phila. Am. Life Ins. Co. v. Turner, 131 S.W.3d 576, 593 (Tex. App.—
Fort Worth 2004, no pet.) (statutory definitions are relevant to interpretation of
class member’s contracts); Mescalero Energy, Inc., 56 S.W.3d at 323 (statutory
definitions can be used to determine commonly understood meaning of industry
term). Under title 15 of the United States Code, the term “bank” means:
(A) a banking institution organized under the laws of the United
States or a Federal savings association, as defined in section 1462(5)
of Title 12, (B) a member bank of the Federal Reserve System, (C)
any other banking institution or savings association, as defined in
section 1462(4) of Title 12, whether incorporated or not, doing
business under the laws of any State or of the United States, a
substantial portion of the business of which consists of receiving
deposits or exercising fiduciary powers similar to those permitted to
national banks under the authority of the Comptroller of the currency
pursuant to section 92a of Title 12, and which is supervised and
examined by State or Federal authority having supervision over banks
or savings associations, and which is not operated for the purpose of
evading the provisions of this chapter, and (D) a receiver, conservator,
or other liquidating agent of any institution or firm included in clauses
(A), (B), or (C) of this paragraph.
15 U.S.C. § 78c(a)(6) (2012). Under the Texas Finance Code, “bank” means a state
or national bank. Tex. Fin. Code Ann. § 31.002(a)(2) (West Supp. 2013). A “state
9
bank” is a banking association organized under Finance Code subtitle A with the
express power to receive and accept deposits and possessing other rights and
powers expressly or impliedly granted by subtitle A. Id. § 31.002(a)(50). A
“national bank” is a banking association organized under United States Code title
12, section 21. Id. § 31.002(a)(37). The Texas Business and Commerce Code
defines “bank” as “a person engaged in the business of banking and includes a
savings bank, savings and loan association, credit union, and trust company.” Tex.
Bus. & Com. Code Ann. § 1.201(a)(4) (West 2009), §§ 4.105(1), 4A.105(a)(1)
(West 2002 & West Supp. 2013), § 9.102(a)(8) (West 2013).
The United States Code defines “broker” as “any person engaged in the
business of effecting transactions in securities for the account of others.” 15 U.S.C.
§ 78c(a)(4). In Texas, a “broker” or “dealer” includes every person or company
who engages in “selling, offering for sale or delivery or soliciting subscription to
or orders for, or undertaking to dispose of, or to invite offers for any security or
securities . . . .” Tex. Rev. Civ. Stats. Ann. art. 581-4(C), (H) (West 2010). The
term includes every person or company that deals in any other manner in any
security or securities within the state. Id. art. 581-4(C); see also 7 Tex. Admin.
Code § 3.3 (Tex. Fin. Comm’n, Securities Activities of Subsidiaries of State
Banks) (state bank can establish or acquire a subsidiary that engages in securities
activities as long as the subsidiary complies with state and federal rules applicable
to registered broker-dealers); 34 Tex. Admin. Code § 7.101 (Comptroller of Pub.
Accounts, Definitions) (defining “financial institution” to include banks and
broker-dealers). A “broker” under the Business and Commerce Code is a “person
defined as a broker or dealer under the federal securities laws, but without
excluding a bank acting in that capacity.” Tex. Bus. & Com. Code Ann.
§ 8.102(a)(3) (West 2011).
10
Finally, case law suggests that mere overlap in the services provided by a
nonbanking entity, such as a brokerage firm, with the services provided by a bank
does not transform the nonbanking entity into a bank. For instance, in Securities
Industry Association v. Board of Governors of the Federal Reserve System, the
United States Supreme Court upheld as reasonable an agency’s determination that
a bank’s proposed acquisition of a discount brokerage firm, a “nonbanking entity”
under the applicable statute, was exempt from the strictures of the Bank Holding
Company Act, which prohibits banks from acquiring nonbanking entities unless
the board determines that the nonbanking activities of a securities brokerage are
“closely related” to banking. 468 U.S. 207, 221 (1984); see 12 U.S.C. § 1843(c)(8)
(2012). The agency had determined that banks offered brokerage services as an
accommodation to their customers, utilized the same transaction execution
techniques as brokers, employed personnel with similar training and expertise to
brokers, and used the same financial facilities as brokers. Sec. Indus. Ass’n, 468
U.S. at 211–12. The agency also concluded that banks are generally equipped to
offer the same type of discount brokerage services provided by a brokerage firm.
Id. at 212. Essentially, the agency determined that the bank possessed the
capability to function as a broker-dealer; it did not determine that broker-dealers
could likewise function as banks.
In Brenham Production Credit Association v. Zeiss, the City of Brenham
sought to levy taxes on a credit association, arguing that the credit association was
taxable as a “banking corporation” under then-applicable law. 264 S.W.2d 95, 133
(Tex. 1953). Because the credit association’s purpose was limited to providing
short-term loans to shareholder farmers for agricultural purposes and despite the
fact that banks do loan money—just as some banks do offer brokerage services—
the Texas Supreme Court held that the credit association was not a banking
11
corporation for taxation purposes. Id. at 136. Similarly, in this case, broker-dealers
Schwab and Fidelity perform a limited function—facilitating the purchase and sale
of securities for their clients. The fact that banks offer similar services does not
make Schwab or Fidelity equivalent to a bank.
Citing two out-of-state cases, Mrs. McNelly argues that brokerage firms
providing check-writing privileges are “uniformly” viewed as banks under the
Uniform Commercial Code (UCC). Particularly, she equates the Schwab brokerage
account with a bank account because Schwab provided check-writing privileges in
conjunction with the brokerage account. The cases Mrs. McNelly cited are
distinguishable; they stand for the proposition that a brokerage firm cannot use its
status as a nonbanking entity to shield itself from UCC article 4 liability when it
either charges a customer’s account on a check that was not properly payable or
fails to give proper notice of dishonor. See, e.g., Nisenzon v. Morgan Stanley DW,
Inc., 546 F. Supp. 2d 213, 224–25 (E.D. Pa. 2008); Edward D. Jones & Co. v.
Mishler, 983 P.2d 1086, 1095 (Or. Ct. App. 1999). In this case, we are not
assessing Fidelity or Schwab’s liability to another individual under the UCC;
rather, we are defining a term for the purpose of interpreting a contract in
accordance with the parties’ express intent. Mrs. McNelly has not cited and we
have not found any binding authority equating banks with brokerage firms in the
context of interpreting a premarital agreement, and we decline to do so in this case.
Based on the foregoing and in keeping with the couple’s express intent as
memorialized in their premarital agreement, we conclude that the premarital
agreement is not ambiguous because the plain meaning of “bank” is ascertainable
and does not include brokerage firms like Fidelity and Schwab. The premarital
agreement states that any separate-property funds deposited into joint “bank”
accounts would become community property. None of the separate-property funds
12
at issue in this case was deposited into joint “bank” accounts. Therefore, none of
the separate-property funds at issue in this case became community property. The
trial court erred when, based on its erroneous interpretation of the unambiguous
premarital agreement, it characterized as community property the $1.2 million
from the sale of Rockin R Gasworks that was deposited into the joint brokerage
accounts at Schwab and Fidelity.
We must now decide whether the trial court’s mischaracterization resulted in
harm. Mischaracterization of community property as separate property is harmful
and requires reversal only if the mischaracterization affects the just and right
division of the community estate. Boyd, 131 S.W.3d at 617. We need not reverse
the trial court if the mischaracterization has only a de minimis effect on the
division. Id. On the other hand, if a trial court mischaracterizes separate property as
community property—as the trial court did here—the error is by definition
harmful, and we must reverse and remand because the subsequent division of the
community estate would divest the spouse of his or her separate property. Barnard
v. Barnard, 133 S.W.3d 782, 790 (Tex. App.—Fort Worth 2004, pet. denied);
Smith v. Smith, 22 S.W.3d 140, 147 (Tex. App.—Houston [14th Dist.] 2000, no
pet.) (citing Eggemeyer v. Eggemeyer, 554 S.W.2d 137, 140 (Tex. 1977)); see also
Tex. Const. art. XVI, § 15.
Mrs. McNelly argues that even if the trial court erred, the error was harmless
because the brokerage accounts were joint accounts, giving Mrs. McNelly a right
to half of the funds, despite their separate character. Mrs. McNelly’s position is
untenable. Under the Estates Code, a joint account is an account payable on request
to one or more of two or more parties, regardless of whether there is a right to
survivorship. Tex. Estates Code Ann. § 113.004(2) (West 2013).3 A joint account
3
See also Acts 2009, 81st Leg., R.S., ch. 680 (enacting Texas Estates Code, effective Jan.
13
belongs to the parties in proportion to the net contributions by each party to the
sums on deposit unless there is clear and convincing evidence of a different intent.
Id. § 113.102 (West 2013). The accounts at Schwab and Fidelity were joint
accounts. Mrs. McNelly had the right to withdraw funds from these accounts, and
the brokerage firms were entitled to pay Mrs. McNelly without incurring liability.
See id. § 113.203(a) (West 2013) (protecting financial institutions from liability).
However, Mrs. McNelly’s interest in the account was not equal to Mr. McNelly’s
interest unless Mrs. McNelly deposited an equal amount of funds into the account
or presented clear and convincing evidence that she and Mr. McNelly intended for
Mrs. McNelly to have an equal interest. The record contains no evidence that Mrs.
McNelly deposited an equal amount of funds into the brokerage accounts, and Mrs.
McNelly does not argue on appeal that she and Mr. McNelly intended equal
ownership in the joint accounts, let alone that such an intent was proved by clear
and convincing evidence. Mrs. McNelly’s reliance on Holmes v. Beatty, 290
S.W.3d 852 (Tex. 2009), in support of her position is also misplaced. The issue in
that case was whether a married couple intended to create rights of survivorship in
their joint investment accounts, which contained community-property funds, not
whether each spouse owned an equal share of the funds held in the joint investment
accounts. Holmes, 290 S.W.3d at 853–54, 862.
Advancing a similar argument but citing the inception-of-title rule, Mrs.
McNelly further contends that Mr. McNelly’s $1.2 million in separate property
immediately became her and Mr. McNelly’s separate property in equal shares once
it was deposited into the joint brokerage accounts. Mrs. McNelly did not cite any
authority for this proposition, and we reject it. The character of property is
determined by the inception of title. Boyd, 131 S.W.3d at 612. Inception of title
1, 2014).
14
occurs when the right to own or claim the property arises. Harrell v. Hochderffer,
345 S.W.3d 652, 658 (Tex. App.—Austin 2011, no pet.); Boyd, 131 S.W.3d at 612;
see Tex. Fam. Code Ann. § 3.404(a) (West Supp. 2013). The trial court found that
Rockin R Gasworks was Mr. McNelly’s separate property because he owned an
interest in the business prior to the marriage. The parties stipulated that $1.2
million of the proceeds from the sale of Mr. McNelly’s partnership interest were
deposited in equal amounts into the Schwab and Fidelity brokerage accounts. This
means that the $1.2 million is traceable to Mr. McNelly’s separate-property interest
in Rockin R Gasworks. Mrs. McNelly did not acquire a one-half ownership interest
in Mr. McNelly’s separate property simply because his separate property was
deposited into joint accounts. See Tex. Estates Code Ann. § 113.102. Mrs.
McNelly’s arguments in favor of an equal distribution of the funds despite the
court’s erroneous characterization must fail.
The trial court mischaracterized Mr. McNelly’s separate property as
community property and committed harmful error. This error caused the trial court
to abuse its discretion in the division of the community estate. See Jurek, 296
S.W.3d at 873; Barnard, 133 S.W.3d at 789–90. We sustain Mr. McNelly’s first
issue.
II. Whether the trial court erred when it characterized the paintings
“Move’em Out,” “Upstream in Hurry,” and “El Gringo” as community
property.
The trial court awarded the paintings “Move’em Out,” “Upstream in a
Hurry,” and “El Gringo” to Mrs. McNelly in the divorce decree. Mrs. McNelly
concedes that these three paintings are Mr. McNelly’s separate property. Mr.
McNelly’s second issue is sustained.
15
III. Whether the trial court erred when it awarded Mrs. McNelly a $60,000
judgment.
The divorce decree awarded a judgment of “$66,000 payable by Stephen E.
McNelly to Lisa Marie McNelly on or before the 30[th] day after entry of this
Decree of Divorce, by cash, cashier’s check, or money order.” Mr. McNelly
challenges only $60,000 of that judgment. He argues that the money judgment was
to satisfy Mrs. McNelly’s reimbursement claim, and as such, the judgment violates
the premarital agreement. He bases his assertion on the fact that the court, in its
conclusions of law, “took into consideration” the parties’ claims for reimbursement
and attorney fees. Since the court decided that each party should bear its own
attorney fees, Mr. McNelly concludes that the money judgment must have been for
reimbursement. We disagree.
A trial court has wide discretion in dividing the parties’ estate and should be
overturned only when it appears that the division was so manifestly unjust and
unfair as to constitute an abuse of discretion. Loaiza v. Loaiza, 130 S.W.3d 894,
899 (Tex. App.—Fort Worth 2004, no pet.); Belz v. Belz, 667 S.W.2d 240, 245
(Tex. App.—Dallas 1984, writ ref’d n.r.e.). The trial court can award a money
judgment to one spouse in order to achieve an equitable division or to satisfy a
spouse’s reimbursement claim. Schlueter v. Schlueter, 975 S.W.2d 584, 588 (Tex.
1998); Belz, 667 S.W.2d at 245.
We interpret the trial court’s decision in this case as an effort to achieve an
equitable division of the community estate and not as a reimbursement judgment
for two reasons. First, the trial court never characterizes the $60,000 award as a
reimbursement judgment. See Tex. Fam. Code Ann. § 7.007 (West Supp. 2013)
(court shall determine the rights of both spouses in a claim for reimbursement);
see, e.g., Heggen v. Pemelton, 836 S.W.2d 145, 146 n.1 (Tex. 1992) (trial court’s
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decree contained a judgment to equalize the division of community property and a
separate judgment for reimbursement); Garcia v. Garcia, 170 S.W.3d 644, 647
(Tex. App.—El Paso 2005, no pet.) (divorce decree specifically found that one
spouse was entitled to reimbursement and awarded a judgment accordingly).
Second, the couple’s premarital agreement placed specific limits on the couple’s
reimbursement rights:
If the marriage of the Parties terminates for any reason, either Party
waives any right to claim reimbursement to his or her separate or
community property estate for expenditure of his or her separate or
community property or income from such property used to repay a
credit transaction made by the other party.
Because we have already concluded that the trial court mischaracterized the
sale proceeds that were deposited into joint brokerage accounts, we need not
determine whether the trial court abused its discretion in awarding the $60,000 to
Mrs. McNelly as part of the equitable division of the community estate. Instead, in
light of our decision in Section I above, we leave it to the trial court on remand to
achieve a just and right division of the community estate. See Boyd, 131 S.W.3d at
618; Smith, 22 S.W.3d at 153; McElwee v. McElwee, 911 S.W.2d 182, 190 (Tex.
App.—Houston [1st Dist.] 1995, writ denied). Mr. McNelly’s third issue is
overruled.
IV. Whether the trial court erred when it declined to award Mr. McNelly
attorney fees.
The trial court determined that each party should bear its own attorney fees.
With regard to attorney fees, article II.K of the premarital agreement provides:
If either Party brings an action or other proceeding to enforce this
Agreement or to enforce any judgment, decree, or order made by a
court in connection with this Agreement, and such enforcement is
contested, the Party seeking enforcement, if successful, shall be
entitled to recover reasonable attorney’s fees and other necessary
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costs from the other party.
In the event that the marriage is terminated by divorce, . . . it is agreed
that neither party can recover from the other (or his or her property)
any attorney’s fees, . . . which relate to services rendered towards the
assertion of claims against the other Party’s separate estate or separate
assets.
If either party unsuccessfully seeks to invalidate some or all of this
Agreement, or unsuccessfully seeks to recover property in a manner at
variance with this Agreement, then such party shall be liable to the
other party for all reasonable and necessary attorney’s fees and
litigation expenses incurred by such other party in successfully
defending his or her rights under this Agreement.
The first sentence of this provision is concerned with actions to enforce the
agreement. The second sentence is concerned with suits for divorce. The third
sentence is concerned with actions to invalidate the agreement. Citing only the first
sentence, Mr. McNelly argues that he was entitled to attorney fees because he had
to file a “Counter Petition to Enforce the Premarital Agreement” and was
ultimately successful in his bid to enforce the agreement. He contends that his
petition constituted an action or proceeding to enforce the premarital agreement.
Mr. McNelly’s argument lacks merit.
Mr. McNelly actually filed a “Counter Petition for Divorce,” in which he
asked the trial court to enforce the premarital agreement. A suit for divorce is an
action to terminate a valid marriage, not an action to enforce a contract. See Estate
of Claveria v. Claveria, 615 S.W.2d 164, 167 (Tex. 1981) (marriage can only be
terminated by death or court decree); Robertson v. Melton, 115 S.W.2d 624, 628
(Tex. 1938) (breach of contract suit is an action to enforce the contract); EOG
Resources, Inc. v. Hurt, 357 S.W.3d 144, 147–48 (Tex. App.—Fort Worth 2011,
pet. denied) (same); Trinity Universal Ins. Co. v. Sweatt, 978 S.W.2d 267, 270
(Tex. App.—Fort Worth 1998, no pet.) (suit for declaratory judgment is an action
to enforce a contract); 39 Tex. Jur. 3d Family Law § 335 (2011) (divorce suit is an
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action to release spouses from the bonds of matrimony); see also Tex. Civ. Prac. &
Rem. Code Ann. § 37.004(a) (West 2008) (defining subject matter of declaratory
judgment actions to include determination of rights under a contract). Asking the
court to enforce a premarital agreement within a divorce petition does not alter the
nature of this case; it remains a divorce suit and triggers the second attorney-fee
provision that precludes either party’s recovery of attorney fees. We conclude,
therefore, that the trial court did not err when it declined to award attorney fees to
Mr. McNelly. Mr. McNelly’s fourth issue is overruled.
V. Whether the trial court erred when it declined to impose a geographic
restriction upon Mrs. McNelly.
The divorce decree gave Mrs. McNelly the exclusive right to designate
A.M.M.’s primary residence and did not impose a geographic restriction on that
right. Mr. McNelly argues that the trial court abused its discretion when it granted
Mrs. McNelly the exclusive right to designate A.M.M.’s primary residence without
regard to geographic location because “there is no legal or factual evidence to
support the trial court’s decision.” He further argues that the lack of a geographic
restriction is contrary to A.M.M.’s best interest because it denies his daughter
meaningful contact with her father. We disagree.
Conservatorship decisions are reviewed for an abuse of discretion. In re
J.A.J., 243 S.W.3d 611, 616 (Tex. 2007); In re M.M.M., 307 S.W.3d 846, 849
(Tex. App.—Fort Worth 2010, no pet.). A trial court abuses its discretion if it acts
without reference to any guiding principles; that is, if the court’s decision was
arbitrary or unreasonable. In re J.A.J., 243 S.W.3d at 616; In re M.M.M., 307
S.W.3d at 849. Legal and factual sufficiency are not independent grounds of error
but are relevant factors in deciding whether the court abused its discretion. In re
M.M.M., 307 S.W.3d at 849. In determining whether the trial court abused its
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discretion because the evidence was legally or factually insufficient, we consider
whether the trial court had sufficient information upon which to exercise its
discretion and whether it erred in its application of that discretion. Id. Traditional
sufficiency review comes into play with regard to the first question, and with
regard to the second question, we determine whether the trial court made a
reasonable decision. Id.
When a court appoints both parents as joint managing conservators, it must
designate to one of them the exclusive right to determine the child’s primary
residence, with or without geographic restrictions. Tex. Fam. Code Ann.
§ 153.134(b)(1) (West 2014). The Texas Family Code provides some basic guiding
principles for courts making these decisions. First, the best interest of the child is
the court’s primary consideration in determining issues of conservatorship and
possession of and access to the child. Tex. Fam. Code Ann. § 153.002 (West
2014); see also Lenz v. Lenz, 79 S.W.3d 10, 14–16 (Tex. 2002) (best-interest
factors); Holley v. Adams, 544 S.W.2d 367, 371–72 (Tex. 1976) (best-interest
factors). Second, the public policy of this state is to (1) assure that children will
have frequent and continuing contact with parents who have shown the ability to
act in the best interest of the child; (2) provide a safe, stable, and nonviolent
environment for the child; and (3) encourage parents to share in the rights and
duties of raising their child after the parents have separated or dissolved their
marriage. Id. § 153.001 (West 2014).
At the time of the trial, Mrs. McNelly was living in Parker County with
A.M.M., the couple’s daughter. Mrs. McNelly had lived intermittently in the
Parker County residence for thirteen years. Mr. McNelly was living in Somervel
County at the time of trial, less than 40 miles from Mrs. McNelly’s Parker County
residence. See In re P.M.G., 405 S.W.3d 406, 413 (Tex. App.—Texarkana 2013,
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no pet.) (taking judicial notice of distance between Texarkana and Denton).
A.M.M. attended private school in Tarrant County, near the Parker County
residence. Although Mrs. McNelly did testify that the job market would factor into
any decision to relocate, the record contains no evidence that she actually intended
to relocate.
For his part, Mr. McNelly did not present any evidence that the trial court’s
decision would limit his ability to maintain contact with his daughter. He presented
no evidence that a geographic restriction would be in A.M.M.’s best interest and
no evidence that the lack of a geographic restriction was not in A.M.M.’s best
interest. He presented no evidence that his ability to maintain contact with A.M.M.
had been or would be negatively impacted unless the court imposed a geographic
restriction. The only evidence that Mr. McNelly presented in his favor was that he
had multiple children and grandchildren and that he intended to convert his son’s
bedroom into A.M.M.’s bedroom once his son left for college. While this evidence
shows that Mr. McNelly had experience raising children and was making an effort
to provide a stable home life for A.M.M., it does not support the imposition of a
geographic restriction, especially considering uncontroverted testimony that Mr.
McNelly inconsistently exercised his visitation rights with A.M.M. See, e.g.,
Morgan v. Morgan, 254 S.W.3d 485, 489 (Tex. App.—Beaumont 2008, no pet.)
(court of appeals upheld imposition of geographic restriction on mother who
wanted to move to Louisiana when father exercised visitation rights consistently,
testified that the children did not know the relatives in the new location, testified
that the mother had previously threatened to move away, presented evidence that
the children’s grandparents visited every weekend, and presented evidence that the
children were performing well in school); cf. Lenz, 79 S.W.3d at 21 (in a
modification suit, the Texas Supreme Court removed geographic restriction on
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mother who wanted to relocate from the United States to Germany because, among
other things, the mother’s personal well-being, the children’s existing connections
to Germany, and the father’s ability to adjust his employment situation all weighed
in favor of lifting the restriction).
We cannot say that the trial court’s decision was arbitrary or unreasonable.
The trial court did not abuse its discretion when it declined to impose a geographic
restriction on Mrs. McNelly’s right to determine A.M.M.’s residence. Mr.
McNelly’s fifth issue is overruled.
CONCLUSION
Because the trial court erred in its interpretation of the premarital agreement,
we reverse the portion of the trial court’s decree dividing the marital estate and
remand for further proceedings in accordance with this opinion, including a
determination of the community estate and a just and right division of the parties’
community property. See Williams, 246 S.W.3d at 216. We affirm the remainder of
the divorce decree.
/s/ Marc W. Brown
Justice
Panel consists of Justices Boyce, Christopher, and Brown.
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