INTERESTING CASES: July 6, 2016 Sallee S. Smyth

1. Rogers v. Rogers, 2016 Tex. App. LEXIS 5960 (Tex. App. – Houston [1st Dist.] June 1, 2016) (mem. opinion) (Cause No. 01-154-00224-CV)

H and W both sought primary JMC in their divorce proceeding. The issue was tried to a jury who determined that H should be named primary with the exclusive right to establish domicile of the children within a specified geographic area. The court adopted the jury’s verdict but gave both H and W the independent right to make decisions regarding the children’s education. The trial court ordered W to pay child support but provided terms which abated her obligation to pay if a judgment rendered in her favor against H for unspecified fraud claims was not paid by a certain date, permitting W to forego her monthly c/s obligation until the total amount of the judgment had been credited. H appealed claiming that by awarding W the independent right to make educational decisions, the court contravened the jury’s verdict giving H the right of domicile because W could decide on a school outside the area in which he and the children lived. Further H complained that the court’s ruling to abate W’s c/s in order to satisfy an unrelated judgment was contrary to established principles governing child support. The COA first determined that W’s independent right of education was not unlimited but instead her decision making authority was restricted to the geographic area within which H was required to live and further her right was tempered by the H’s equally independent right to make those decisions, finding no error and determining that the jury’s verdict was not compromised. As to the order abating c/s, the COA found that the decree did not specify that the judgment was part of the overall property division but noted it was for “fraud on the community,” ignoring that such an award would have been part of the division under TFC 7.009. Even so, H did not provide a reporter’s record and the COA was unable to discern the specific basis for the judgment aside from a reference to H’s improper depletion of financial accounts during the divorce in violation of temporary orders. Without such a record the COA presumed that the evidence supported the trail court’s decision to structure c/s in the manner in which it did, noting that W was ordered to pay c/s as provided by common legal principles. Judgment affirmed.

2. Espronceda v. Espronceda, 2016 Tex. App. LEXIS 6071 (Tex. App. – Corpus Christi June 9, 2016) (mem. opinion) (Cause No. 13-15-00081-CV)

H and W married in 1997 and had one child. The separated in 2011 and W filed for divorce, seeking appointment as SMC and requesting child support “in the manner to be specified by the court.” W pled for a disproportionate division, confirmation of her separate property and asserted several specific reimbursement claims. W requested extraordinary relief, seeking a writ of possession to regain custody of the child, alleging that H was preventing her from seeing the child and that he was liquidating her separate property within the residence and mismanaging a business to fund his drug use. The court issued temporary orders, enjoined H’s possession of the child but did not order c/s. H appeared at trial through counsel only. W testified that H had paid no support for the child since their separation and she gave some information regarding his possible earnings. She further testified as to the nature of her separate property including personal property she valued at a minimum of $300,000 which H had removed from the residence. The trial court signed a decree appointing W SMC and ordering supervised access. Further the decree ordered H to pay c/s and awarded retroactive support of $4,000 for the period of separation when H made no financial contributions. Finally the trial court confirmed W’s separate property and ordered H to return all removed items to W by a date certain, providing that if not returned, W was awarded a judgment against H in the amount of $300,000. H appealed. First, H complained that the pleadings did not support an award of retroactive c/s. The COA agreed, noting that this is something that requires specific pleadings and W only sought c/s in the manner specified by the Court. Further, H was never ordered to pay any temporary c/s so it could not have been for an arrearage and the COA found the issue was not tried by consent because W’s counsel never orally requested retroactive c/s. As to the judgment the COA found that although the award for H’s conversion of property was not specifically pled as a reimbursement claim, this issue was in fact tried by consent. H argued that the evidence was insufficient to support a value of $300,000. The COA found that when converted property has no readily ascertainable value, the proper measure of damages is the actual value of the property to the owner at the time of conversion, further stating this was particularly true for “household goods.” The COA noted that W testified to a value of at least $300,000 for the personal property removed by H, stating that if she had to replace it all the cost would likely be more. The COA

1 found this testimony sufficient to support the damages awarded. Retroactive c/s award reversed and rendered. All other orders affirmed.

3. In the Interest of P.A.C., 2016 Tex. App. LEXIS 6136 (Tex. App. – Houston [14th Dist.] June 9, 2016) (Cause No. 14-14-00799-CV)

H and W divorced in May 2012. They were named JMC and H was designated as primary parent with the right to establish residence and domicile of the parties two children. W was given supervised access for a period of two months or until such time as she completed a psychological evaluation, whichever occurred later. The decree provided that if H could not establish good cause for W’s possession to remain supervised, W would obtain an SPO beginning in August 2012. Several hearings occurred in August 2012 and the trial court issued a modification order continuing W’s supervised access. H remarried in June 2013. During 2013 and 2014 both parties filed modifications (W seeking primary parent or SPO and H seeking SMC and continued supervision of W’s access). The case was tried to a jury who found that the JMC should not be replaced and that H should remain primary. The trial court modified certain rights which had previously been shared, awarding H the exclusive right to consent to marriage and represent the children in legal actions. Access remained supervised until W completed psychological counseling and demonstrated compliance with court orders. W appealed, complaining that H had no pleadings on file seeking a modification of specified rights. The COA found that H’s request for SMC encompassed his request for the exclusive parental rights assigned to SMC’s under the Family Code which included the right to consent to marriage and represent the children in legal actions and that further specificity was not required. The COA found the evidence sufficient to support the court’s orders restricting W’s access. Judgment affirmed.

4. Cojocar v. Cojocar, 2016 Tex. App. LEXIS 6335 (Tex. App. – Austin June 16, 2016) (mem. opinion) (Cause No. 03-14-00122-CV)

During divorce, H and W voluntarily participated in mediation and entered into an MSA. W sought entry of a final decree in accordance with the MSA. H filed a motion revoking his consent to the MSA. The trial court signed W’s decree and H appealed. H argued that under TFC 6.602 an MSA cannot be enforced unless there is a written agreement signed by the parties to participate in mediation or there is a court order referring the matter to mediation. H asserts that obtaining an agreement or court order referring the case to mediation is required under TFC 6.602(a), permitting enforcement under TFC 6.602(c) only when all sections of the statute have been complied with. The COA rejected H’s argument noting that the statute says the court “may” refer a case to mediation but does not require it. Further, the statute does not limit the parties from informally agreeing to attend mediation, bypassing any requirement that they obtain a separate written agreement or court order. Thus the statute does not make a court referral an prerequisite to enforcement of an MSA executed under TFC 6.602. At the entry hearing H’s counsel also asserted that he had claims relating to fraudulent inducement but advised the trial court that he would present this evidence at a hearing on his intended post-judgment motion for new trial under standards for newly discovered evidence. After the decree was signed, H filed his motion but then withdrew it 10 days later. H’s complaints on appeal regarding any allegations of fraud not being heard by the court were therefore waived. Judgment affirmed.

5. In re Morris, 2016 Tex. App. LEXIS 6624 (Tex. App. – Houston [14th Dist.] June 22, 2016, orig. proceeding) (Cause No. 14-16-00227-CV)

In a 2004 final decree H and W were appointed JMC. Ten years later, W signed an affidavit of relinquishment stating that termination of her parental rights was in the child’s best interest but stating no facts which supported her claim. In 2015 H filed a suit to terminate W’s parental rights, alleging the affidavit as the only grounds supporting termination. The parties attended mediation and signed an MSA which provided that the parties agreed the court would enter an order terminating W’s rights and the proposed order was attached to the MSA as an exhibit. The W did not agree in the MSA or the proposed order that termination was in the child’s best interest. The MSA was filed with the court and H appeared for a prove up hearing. H testified

2 only to the identity of the parties and the existence of the MSA and requested the court to render judgment on the MSA. The trial court took judicial notice of the MSA and took the case under advisement. Thereafter the trial court denied rendition on the MSA finding that the statutory requirements under Chapter 161 (clear and convincing evidence of grounds for termination and that termination is in the child’s best interest) had not been satisfied and that granting entry on the MSA in these circumstances would circumvent the mandatory provisions of TFC 161.001. H filed a petition for writ of mandamus. The COA notes the mandatory nature of Chapter 161 proof requirements, noting that while an affidavit of relinquishment can provide evidence of best interest, the court is not required to determine best interest on an affidavit alone., further noting that H did not offer the W’s affidavit into evidence at the prove up hearing. Instead, H relied solely on the MSA which made no statement and contained no agreement that termination was in the child’s best interest. On the limited record from the prove-up hearing the COA found that the trial court was within its right to find that the statutory requirements of Chapter 161 had not been met. Turning to the MSA, the COA examined the various subsections of TFC 153.0071 and concluded that it does not apply in Chapter 161 termination proceedings. The COA interpreted TFC 153.0071(3) as requiring enforcement of MSA’s only in SAPCR’S involving conservatorship, visitation and support. The COA determines that requiring enforcement of an MSA terminating parental rights would render the statutory requirements for proof under TFC 161.001 entirely meaningless. The COA reasons that W’s affidavit consenting to termination and an MSA agreeing to termination combine only to satisfy the requirement that grounds for termination exist but do not satisfy the obligation to present clear and convincing evidence that termination is in the child’s best interest. The COA concludes that while a termination suit is a SAPCR which can be referred to mediation under TFC 153.0071(c), subsection (e) does not specify that a compliant MSA is enforceable in all SAPCR’S, allowing for an interpretation which does not permit the trial court to avoid the best interest inquiry when an MSA involves an agreement to termination parental rights. The COA expressed concern that allowing MSA’s to circumvent termination proof would not adequately protect the interests of the child. In summary the COA holds that TFC 153.0071(3) (obligating rendition of judgment on a compliant MSA) does not apply in termination cases and the trial court may refuse rendition if clear and convincing evidence of best interest is not admitted. Mandamus denied.

6. In the Interest of P.R.J.E., 2016 Tex. App. LEXIS 6671 (Tex. App. – Houston [1st Dist.] June 23, 2016) (Cause No. 01-15-01110-CV)

At birth, M tested positive for drugs and TDPRS ended up placing the child in foster care. M decided to terminate her rights and thereafter disappeared. TDPRS filed suit to terminate and served the man M originally identified as the father but he was excluded after testing. After further investigation based on information provided by M TDPRS identified the alleged F and determined his location. Despite this TDPRS chose not to serve the alleged F because the child was less than one year old and F had not registered with the paternity registry, making service unnecessary under TFC 161.002(b)(3). The trial court terminated both parent’s rights and TDPRS then provided notice of the order to F who appealed. F did not challenge the constitutionality of the Family Code statutes which forego service requirements in certain specific circumstances when an alleged F has not registered. Instead, F argued that even if these statutes do not require personal service in termination of parental rights proceedings where the identity and location of an alleged F are known, due process demands it. The COA agrees that personal service is required in these situations despite what the Family Code says. Further the COA holds that citation by publication will not suffice in those cases where the identify of the alleged F is known. Termination order as to M affirmed, but reversed and remanded as to F.

7. Ochsner v. Ochsner, 2016 Tex. 569 (Tex. Sup. Ct. June 24, 2016) (Cause No. 14-0638)

H and W divorced in 2001. The decree obligated H to pay $240/mo in child support for so long as the child attended the Enron Kids Center (EKC). The decree further provided that on the first day of the month after the child ceased attending EKC the H was to pay $800/mo in child support either to the child support registry or to W directly. The child stopped attending EKC in

3 September 2002. Thereafter, H continued to pay $240/mo and based on an alleged verbal agreement with W, H paid for day care expenses at four other facilities until December 2010 totaling just over $78,000. The parties; agreement was never reduced to a court order. In January 2011 W file a motion to enforce child support claiming that H failed to pay the full amount of child support from October 2002 to January 2011, owing arrearages just over $55,000. The trial court denied W’s motion finding that H was not obligated to pay support after the child stopped attending EKC. W appealed. In 2012 the COA reversed and remanded (2012 Tex. App. LEXIS 4044/2012 WL 1854743). The trial court conducted a second hearing in 2013 and denied W’s motion finding that there were no child support arrearages because the tuition and day care expenses paid by H exceeded what H owed in support. Each party was ordered to pay their own fees. W appealed again. The COA concluded that the trial court had no authority to reduce or ignore the calculated child support arrearages. The COA further held that H was not entitled to an offset under TFC Chapter 157 because H was never providing actual support to the child while in his possession. The COA found that when private agreements between parties to alter their child support obligations are not approved by the court and reduced to an order they are unenforceable, warranting reversal and remand with instructions to enter a judgment confirming child support arrearages. H filed a petition for review with the Texas Supreme Court. Justice Willet wrote for the majority. Justice Guzman wrote a concurring opinion. Justices Boyd and Johnson dissented and each wrote dissenting opinions. MAJORITY: The majority holds that a trial court is authorized to consider evidence of payments made outside the specific terms of the child support order in determining and calculating whether or not a c/s arrearage exists. Specifically the majority states: “A trial court in a child support enforcement proceeding [Family Code Chapter 157] – a wholly separate action from the initial child support order proceeding [Family Code Chapter 154] – may consider evidence of direct payments like those that were undisputedly made here when confirming the amount of arrearages.” The majority focuses its attention on TFC 157.263 which obligates the trial court to determine the “amount of arrearages” when a money judgment is requested. Noting that the court which issued the child support order in the first place “determined the total dollar value of the support obligation,” the S.Ct. finds that in an enforcement proceeding the trial court’s duty under the Family Code is to determine the amount of that obligation which has been unmet, stating that nothing in the statutes suggests that the trial court can consider only payments made through the registry when deciding what an obligor has paid, and thus the amount for which the obligor is in arrears. The majority indicates that the trial court’s discretion in determining the amount of child support to be ordered initially in no way limits the trial court’s discretion in an enforcement proceeding. To support this position the majority points to those statutes which allow the trial court to consider the payment record as well as evidence contrary to it. Boldly the majority states: “… in a child support enforcement action, a trial court may consider the various payments made by the obligor, regardless of what precise manner an earlier court – presiding over a distinct proceeding – specified in the child support order.” The S.Ct. distinguishes precedent which holds that neither parties’ or the trial court may reduce or modify child support arrearages in an enforcement proceeding by finding that no reduction or modification of the original child support amount has occurred. Instead the S.Ct. finds it has simply allowed private school tuition payments (made to a third party to satisfy an obligation incurred by W) to be considered when determining the amount of child support arrearages, payments which exceeded H’s original child support obligation. The majority states “[c]overing a cost that clearly benefits the child and that reduces the financial burden on the obligee is a fact a trial court may consider in a child support enforcement proceeding … Neither law nor logic limits the trial court to the registry record. In confirming the alleged arrearage, the court was authorized to credit testimony and supporting documentary evidence.” Considering the concerns expressed by the dissent that the majority holding will invite gamesmanship, the majority is clear to state that their holding must be confined to the facts presented and it should not be construed as suggesting that every tuition payment is child support or that parties should be encouraged to make direct payments to bypass the registry or other payment mechanics set forth in an order. Indeed the majority recognizes that such actions could be risky and could result in a finding by the trial court that no such credit should be given, however based on the circumstances of this case the majority determines that the trial court’s decision finding no arrearage should be affirmed, rendering judgment for H. CONCURRING OPINION: Justice Guzman concurs, finding that considering of direct payments to an obligee in determining an arrearage is not a reduction or modification of the original child support obligation so long as the court’s calculations do not reduce the obligation and they are based on the evidence presented, noting that nothing defines “payment record” under TFC 157.162(c) and this statute, along with subsection (c-1) are rules of admissibility that authorize the trial court to accept evidence bearing on payment history as necessary to confirm

4 arrearages. DISSENTING OPINION BY BOYD: In a strong and sound dissenting opinion Justice Boyd focuses on the court’s obligation to enforce an order as written and to enforce payment obligations which are to be made in a certain manner, i.e. through the registry of the court. Justice Boyd recognizes that there are two approaches to the problem. First, the one adopted by the majority, allows evidence of payments outside the order to satisfy claims of child support arrearage (an approach that allows parents to amicably and efficiently revise child support obligations) but may invite more swearing matches when enforcement becomes an issue. The second approach, requiring courts to enforce orders as written, might be less “messy” but might also result in unjust outcomes for parents who thought they were making decisions in their children’s best interest. Even so, Justice Boyd favors the second approach, referencing the many Family Code enforcement statutes that specifically speak to performance “in the manner specified by the child support order,” further noting that nowhere in Chapter 157 (enforcement) do the words “discretion” or “best interest” appear. Justice Boyd believes that the only evidence which may be offered to contradict a payment record from the registry of the court is that evidence which establishes that registry payments were either miscalculated or otherwise not properly credited, allowing an obligor to introduce proof that he otherwise paid through the registry as specified in the order but simply did not receive the proper credit. Justice Boyd asserts that contrary to the majority opinion, the Family Code does not permit a trial court to consider evidence of direct payments made in any manner other than as specified in the court order. TFC 157.002(b)(1) obligates the trial court to “determine the cumulative arrearage … based on the amount owed as provided in the order” making it error for the trial court to consider any payments made in a manner not provided by that order. Justice Boyd discusses the majority’s decision to work its way around the precedent established in Office of Attorney Gen. of Texas v. Scholer, 403 S.W.3d 859 (Tex. 2013) wherein the S.Ct. held (1) “a court in an enforcement proceeding may not adjust arrearage amounts outside the statutorily mandated exceptions, offsets and counterclaims” but “may evaluate evidence only to consider the listed factors and defenses and noting more;” Id. at 865-66 (2) “affirmative defenses that are not included in the statute, like estoppel … are prohibited because they would require courts [hearing child support enforcement motions] to make discretionary determinations;” Id. at 865 and (3) “except for the very narrow circumstances recognized by law – the obligee’s relinquishment of possession and obligor’s provision of support – [the oblgor] may not rely on the other parent’s actions to extinguish his support duty.” Id. at 867. Justice Boyd sees the majority decision in this case as one announcing a “new rule” permitting enforcement courts to consider payments not made in the manner specified by or as provided in a child support order as long as the oblgor relies on those payments to prove that the noncompliant payments met or exceeded the total child support obligation but not to reduce of modify the total obligation. Justice Boyd opines that while this new rule may promote the majority’s view of justice on a case-by-case basis, it will discourage obligors from ever doing more to support their children and instead allow them to fully ignore the specific manner of payments specified in the order but instead claim any and all amounts paid otherwise to fulfill their child support obligations. Justice Boyd does not commit to whether this result is good or bad, he simply believes it is not one the Family Code of the precedent in Scholer supports. COMMENT: It is noteworthy to mention that while H claimed the parties’ had an agreement that he would continue to pay the child’s tuition after she left EKC, W asserted that she never agreed these payments would be in lieu of child support. Instead she testified that she could not afford private school and that she only agreed to send the child because H agreed to pay for it. The dissenting opinions reference this dispute in suggesting that the trial court’s “discretion” in determining who to believe should not come into play in enforcement proceedings where its only job it to enforce the order as written. In addition, in this case the underlying order allowed H to pay child support either through the registry or directly to W, specifying however that direct payments may not receive proper credit. This language is distinctly different from terms which expressly provide that payments made in a way that is contrary to the manner specified will be deemed “in addition to” and “not in lieu of” child support. This well recognized and often used language is never mentioned in any of the opinions and thus its effect on the trial court’s ability to consider payments such as those made by H in this case are unknown. I have concerns that the majority opinion fails to give trial court’s sufficient guidance into the types of non-compliant payments that may be properly credited towards an alleged child support arrearages versus those that may not. For example, if an obligor chose to pay the obligee’s car payments instead of child support and thereafter argued that the payments were made to insure that the child was being safely transported in a reliable vehicle, would this be sufficient to constitute an acceptable child support payment. Or, what if an obligor chose to pay all expenses of various extracurricular activities such as violin lessons or sports club fees, arguing that these payments likewise support the child’s best interest by promoting well

5 rounded cultural experiences or healthy recreational activities … would these types of non- direct, no-compliant payments be viewed in the same way. I also have concerns that the majority opinion will invite creative gamesmanship and shed an entirely new light on enforcement proceedings. It is significant to mention that even when an obligor makes payments in a manner not specified by the order, they can still be held in contempt for violating that order, even if no money judgment is ultimately entered against them under the majority’s decision. On a selfish note, I suppose this decision will make for many more interesting cases in my future!

6 8. In re Belot, Tax Court Memorandum Decision 2016-113, June 23, 2016 (Federal Taxes Weekly Alert Newsletter, Vol. 62, No. 26)

Note: You can all thank Jim Penn of Whitley Penn for recommending this recent Tax Court decision. Don’t get spoiled thinking that I have broadened the scope of my search for Interesting Cases!!!

H and W settled their property issues upon divorce in January 2007, transferring stock in three separate businesses between them so that they would each own 50% after divorce. In late 2007 W brought suit against H in a New Jersey civil court alleging that he has mismanaged the businesses and she sought to compel a judgment requiring him to sell his stock to her. H and W entered into a second settlement to resolve this dispute whereby H sold his shares to W. A tax dispute arose regarding whether or not the sale qualified for non-recognition treatment under Tax Code Section 1041 which declares non-taxable a transfer of property related to the cessation of a marriage if the transfer is pursuant to a divorce or separation instrument and the transfer occurs not more than 6 years after the date of divorce. Any transfer not pursuant to such an agreement or which occurs more than 6 years after divorce is presumed to be taxable however the presumption can be rebutted by showing that the transfer was made to effect the division of property owned by the spouses when the marriage was dissolved. The tax court found that the transfer from H to W of his shares of stock in settlement of her claims were made to effect the division of property owned by them at the time of their divorce and further the sale was related to the cessation of their marriage all as required by Section 1041. The sale was declared non- taxable.

9. Clark v. Clark, 2016 Tex. App. LEXIS 6791 (Tex. App. – Houston [1st Dist.] June 28, 2016, orig. proceeding) (mem. opinion) (Cause No. 01-15-00729-CV)

H & W divorced in 2009 in Fort Bend County and H was given the exclusive right to establish domicile of the parties’ child. H moved to Brazoria County and the suit was subsequently transferred there when H filed suit to terminate W’s parental rights. W filed a counter claim requesting that she be appointed SMC. The parties tried the case to the AJ and waived their right to de novo appeal. The AJ retained the parties as JMC and designated W as the primary parent. The AJ signed an Order in February 20, 2015. H filed a MNT. Thereafter the AJ issued an AJ Report stating that a clerical error existed in the prior order and instructed W’s counsel to prepare a judgment nunc pro tunc. The AJ further recommended that H’s MNT be denied. H filed a petition for writ of mandamus which was denied by the COA finding that it had no jurisdiction to issue a writ of mandamus against an AJ. Thereafter H wrote a letter to the presiding judge requesting that he take action on the AJ’s rulings to finalize the case for purposes of appeal. Soon thereafter H filed a notice of appeal from the substantive order and thereafter filed a second petition for writ of mandamus complaining of the presiding judge’s failure to take action. The COA dismisses H’s appeal, determining under its 4/19/16 decision in Gerke v. Kantara (2016 Tex. App. LEXIS 4099 or 2016 WL 1590847) that an AJ has no authority to render a final judgment in circumstances wherein the parties waive their right to a de novo appeal and that there is no rendition until such time as the presiding court takes action on the AJ’s recommendations. As such, in this case there is not yet a final order subject to appeal. As to the request for mandamus relief, the COA determines that a trial court must take action on an AJ’s rulings and recommendation and has no discretion to avoid this ministerial duty. Mandamus granted with instructions to enter a final order as the presiding judge deems appropriate in light of the AJ’s rulings.

10. In re: I.R.H. & Z., 2016 Tex. App. LEXIS 6988 (Tex. App. – Houston [1st Dist.] June 30, 2016) (mem. opinion) (Cause No. 01-15-00787-CV)

7 In a suit for modification, W sought a geographical restriction on the residence of the children as well as a standard possession order. W made a jury demand and paid the required fee. The case was ultimately set for trial and W’s attorney was allowed to withdraw less than 30 days before trial. On the date of the pre-trial conference, W appeared pro se and requested a continuance and additional time to hire counsel, stating that she was not prepared. H’s counsel asked the court to strike W’s jury demand and proceed to a bench trial arguing that W had failed to follow the local rules by providing all the documentation required. The trial court granted H’s request and tried the case, ordering no geographical restriction, ordering supervised visitation, ordering W to pay child support and awarding H’s counsel substantial fees. W appealed and challenged the denial of her motion for continuance and the striking of her jury demand. The COA found that while local rules permit the trial court to issue discovery sanctions under TRCP 215 if various required financial and other related documents are not timely exchanged, Rule 215 does not authorize striking a jury demand. The COA notes that W had no notice that she could be sanctioned in such a manner at the pre-trial hearing, determining that the sanctions do not fit the crime. Judgment reversed and remanded.

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