Norris J. Devoll v. Rebecca Demonbreun and William Bruce Dowds ( 2012 )

MEMORANDUM OPINION
No. 04-11-00775-CV
Norris J. DEVOLL and Paulette DeVoll,
Appellants
v.
Rebecca DEMONBREUN and William Bruce Dowds,
Appellees
From the 131st Judicial District Court, Bexar County, Texas
Trial Court No. 2008-CI-10538
Honorable John D. Gabriel, Jr., Judge Presiding
Opinion by: Sandee Bryan Marion, Justice
Sitting: Catherine Stone, Chief Justice
Sandee Bryan Marion, Justice
Rebecca Simmons, Justice
Delivered and Filed: November 21, 2012
AFFIRMED
Appellees, Rebecca Demonbreun and William Dowds, sued appellant, Norris DeVoll
(“Norris”), for damages allegedly incurred as a result of the purchase of a house. Judgment in
favor of Demonbreun and Dowds was entered and they recovered $96,540.12 in actual damages
and $47,461.64 in attorneys’ fees. Subsequently, Demonbreun and Dowds filed an Application
for Turnover Relief, seeking to have Norris turn over his community property interests in RWI,
Inc., the Two-O-Six Camedia Partnership, and income from the 3 K’s and J Land Trust. Paulette
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DeVoll (“Paulette”), wife of Norris, filed an intervention in the turnover lawsuit in order to
protect her rights in the contested properties. Following a hearing, the trial court ruled: (1) the
stock of RWI, Inc. is the separate property of Paulette, but the net business income of the
corporation is the community property of Paulette and Norris; (2) the partnership interest in the
name of Paulette in the Two-O-Six Camedia Partnership is the community property of Paulette
and Norris and income from the partnership is also community property; and (3) the 3 K’s & J
Land Trust and its income are the separate property of Paulette. Lastly, the trial court ruled that
all cash in bank accounts in which Norris owned an interest should be turned over and that the
Turnover Order was continuing in effect—thus, Norris had a continuing duty to turn over all
community property described in the Order.
In an opinion and judgment dated September 12, 2012, we affirmed the trial court’s
judgment. Appellants filed a motion for rehearing. We deny the motion, but we withdraw our
opinion and judgment of September 12, 2012, and issue this opinion and judgment in their place
for the purpose of clarifying our conclusion regarding the property known as RWI, Inc.
DISCUSSION
In three issues on appeal, the DeVolls contend the trial court erred by failing to enforce
the provisions of their Agreement to Keep Property Separate (“Agreement”), which was entered
into shortly after their marriage and years prior to Demonbreun and Dowds’ lawsuit. First, the
DeVolls assert the trial court abused its discretion when it found the net income from RWI, Inc.
was community property and subject to the Turnover Order. Second, the DeVolls contend the
trial court abused its discretion when it found that Paulette’s interest in the Two-O-Six Camedia
Partnership was community property and subject to the Turnover Order. Last, the DeVolls argue
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the trial court abused its discretion when it extended the Turnover Order to cover property in
which Norris does not, at this time, own any present or future interest.
An appellate court reviews an issuance of a turnover order for an abuse of discretion. See
Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). Abuse of discretion occurs
when a trial court acts without reference to any guiding rules or principles, or acts in an arbitrary
or unreasonable manner. Id. “In the context of turnover orders, it has been held that a trial
court’s issuance of a turnover order, even if predicated on an erroneous conclusion of law, will
not be reversed for abuse of discretion if the judgment is sustainable for any reason.” Id. (citing
Buttles v. Navarro, 766 S.W.2d 893, 894–95 (Tex. App.—San Antonio 1989, no writ)).
All property acquired by either spouse during marriage belongs to the marital estate, with
the exception of property acquired by gift, devise, or descent. TEX. CONST. art. XVI, § 15; TEX.
FAM. CODE ANN. § 3.002 (West 2006). However, the Texas Constitution recognizes the right of
couples to enter into premarital or marital agreements for the purpose of altering the
classification of spousal or community property. TEX. CONST. art. XVI, § 15. Additionally,
public policy indicates that premarital and marital agreements should be enforced. See Beck v.
Beck, 814 S.W.2d 745, 749 (Tex. 1991). As a result, agreements entered into between parties
both before and during marriage are presumptively enforceable.
A party claiming separate property has the burden of rebutting the community property
presumption by clear and convincing evidence. Bahr v. Kohr, 980 S.W.2d 723, 728 (Tex.
App.—San Antonio 1998, no pet.). Clear and convincing evidence is another way of stating that
the evidence supporting separate property must be factually sufficient. Id. To overcome the
community property presumption, the party generally must trace and clearly identify property
claimed as separate property. Id. Whether property is separate or community is determined by
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the facts that give character to the property, according to the rules of law. Id. “Mere testimony
that property was purchased with separate property funds, without any tracing of the funds, is
generally insufficient to rebut the presumption.” Id. (quoting McElwee v. McElwee, 911 S.W.2d
182, 188 (Tex. App.—Houston [1st Dist.] 1995, writ denied)).
A. RWI, Inc.
Paulette and Norris, along with Norris’s brother, Gene DeVoll (“Gene”), each acquired a
one-third interest in RWI, Inc. when the corporation was initially set up in 1993. In 1994, Norris
transferred his one-third interest to Paulette. In 1995, Gene transferred his one-third interest
back to the corporation. Thus, Paulette became the sole owner of RWI, Inc. The trial court took
notice of this when it held that the stock in RWI, Inc. was Paulette’s separate property.
However, the trial court determined that the net income from RWI, Inc. was Paulette and
Norris’s community property.
At the hearing, Paulette and Norris testified as to the establishment of RWI, Inc. and that,
pursuant to the Agreement, the income generated from the corporation was Paulette’s separate
property. The pertinent provisions of the Agreement on which the DeVolls rely state that “All
properties, both real and personal . . . are declared to be the separate property of that party. . . .
In addition, all future income from and increases in kind or in value of each party’s separate
property will constitute the separate property of that party.”
However, the Agreement also states that “For the purpose of segregating the parties’
properties, the parties will establish and maintain accounting procedures and records and bank
accounts to preserve the separate character of their respective separate funds as is further
provided in this Agreement.” Notably, upon cross-examination, neither Paulette nor Norris
could produce any documentary evidence tracing the income generated from the corporation,
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since 1994, back to Paulette’s separate accounts. No bank documents were produced before
January 2010 to show how Paulette kept the income separate from her accounts with Norris.
When questioned on cross-examination, Norris admitted that he failed to produce any evidence
tracing the income:
Q: And you haven’t produced any documents showing to whom those payments
were made from RWI, correct?
A. No. I have not.
Thus, although the Agreement states that income derived from separate property will
remain separate property, the Agreement also states that the DeVolls must establish and maintain
accounting practices to account for their separate property. Here, the only evidence that the
income was Paulette’s separate property was Paulette and Norris’s testimony. See Bahr, 980
S.W.2d at 728–30 (noting that mere testimony concerning the nature of separate property is not
sufficient to overcome the community property presumption). The DeVolls failed to provide any
bank records or accounting evidence tracing the income solely to Paulette’s separate accounts.
Any person claiming property is separate has the burden to prove it by clear and convincing
evidence. Id. at 728. Here, because the DeVolls did not provide evidence of the “accounting
procedures and records and bank accounts to preserve the separate character of their respective
separate funds” required in their agreement, we cannot say the trial court abused its discretion in
concluding the income was community property. 1
B. Two-O-Six Camedia Partnership
The Two-O-Six Camedia Partnership was created in 2002, with Paulette and Gene as the
general partners. Gene had a 50.1% interest and Paulette had a 49.9% interest. The purpose of
the partnership was to acquire a piece of property owned by Norris and located at 466 Adrian, in
1
Our conclusion should not be read as holding that all properly segregated future income from RWI, Inc. is
community property.
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San Antonio. The property was in foreclosure and the Two-O-Six Camedia Partnership bought
the property.
At the hearing on the turnover, Paulette claimed she used her separate property to
purchase her interest in the partnership. She testified that she used the funds derived from a 1996
settlement of a lawsuit involving her father. She stated that she deposited the funds into a money
market account she owned prior to her marriage to Norris and that the funds had remained in that
account until the purchase of the property at 466 Adrian. She testified that Norris never made
any deposits into this account and that, other than the settlement proceeds, she had never made a
deposit into this account during her marriage to Norris. However, Paulette could not produce
any documents showing the amount of the settlement or any documents tracing the funds used to
purchase the partnership property to a prior settlement:
Q: Okay. So you don’t have any bank account documents. You haven’t
produced any documents showing—[Counsel for Norris and Paulette] said that
you had obtained a settlement, and that settlement money was what was used to
buy the 466 Adrian property, right?
A: That’s correct.
Q: But you haven’t produced any documents showing the amount of the
settlement, have you?
A: I don’t even think I have any of that any more.
Further testimony revealed that the exact amount of the settlement, the name of the bank
into which the settlement funds were deposited, and the source of other funds in that account
could not be determined. Accordingly, we cannot say the trial court abused its discretion in
determining the Two-O-Six Camedia Partnership was the DeVoll’s community property and not
Paulette’s separate property. See id. at 728–30 (determining that wife’s testimony was
insufficient to meet clear and convincing evidence standard that property was separate because
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the evidence offered did not show date account was opened, running balance of account, or
identity of party receiving wire transfer for asserted purchase of property at issue).
C. Turnover Order
In their last issue on appeal, the DeVolls contend the trial court erred because the
Turnover Order requires Norris to turn over property that he presently does not own and in which
he has no future interest. Thus, the DeVolls complain the Turnover Order is beyond the scope of
the turnover statute. See TEX. CIV. PRAC. & REM. CODE ANN. § 31.002(a) (West 2008).
Contrary to the DeVoll’s interpretation, our review of the Turnover Order indicates the
trial court did not order Norris to turn over property in which he does not presently own or have
an interest. Instead, the Turnover Order requires Norris to turnover “[c]ash . . . on hand and in
any bank account in which Norris J. DeVoll has an ownership interest.” The Order also lists the
property in which Norris has a community property interest and orders that he has “a continuing
duty to turn over all community property described [in the paragraphs] above.” Thus, we
conclude the trial court did not abuse its discretion in ordering the specified property to be turned
over and ordering that Norris has a continuing duty to turn over all community property
described in the Order.
CONCLUSION
We overrule the DeVoll’s issues on appeal and affirm the judgment of the trial court.
Sandee Bryan Marion, Justice
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