Alfred E. West, Jr. and Maria F. West v. Elizabeth West

Opinion issued February 9, 2012.

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-11-00051-CV

———————————

Alfred E. West, Jr. and Maria F. West , Appellant

V.

Elizabeth

West , Appellee

On Appeal from the 306th District Court

Galveston County, Texas

Trial Court Case No. 07FD1370

MEMORANDUM OPINION

Alfred

and Maria West appeal from a final judgment after a bench trial on Elizabeth

West’s fraud claim against them, brought in connection with her divorce from Greg

West, who is Alfred and Maria’s son. In two issues, Alfred and Maria challenge

the legal and factual sufficiency of the evidence to support the trial court’s

findings on fraud and damages. We affirm.

Background

In

her petition for divorce from Greg West, Elizabeth West also asserted a claim

against Greg and his parents, Alfred and Maria, for conspiring to defraud her

out of community property. Elizabeth asserted that Greg’s parents purchased

property in Kerrville, Texas shortly after she and Greg were married; Greg and

his parents led her to believe she and Greg were purchasing an ownership

interest in the property; she and Greg made monthly payments on the property

out of their community estate and paid to improve the property with a road to

the main highway, a fence, and a canopy shed for their travel trailer; she and

Greg vacationed and hunted on the property regularly; and Greg’s parents did

not inform her that she and Greg had no ownership interest in the property and

its improvements until she filed for divorce. Alfred and Maria assert that Elizabeth

had no basis for her belief that she and Greg had an interest in the property

and that the payments Elizabeth and Greg made were not payments toward the

purchase of the property, but instead, rental payments pursuant to a lease

entered into between them and Greg.

After

a bench trial, the trial court concluded that Greg and his parents committed a

fraud on Elizabeth and Greg’s marital estate with respect to the Kerrville

property and that the lease was executed by Greg without Elizabeth’s knowledge.

On this basis, the trial court found that the community estate was entitled to

reimbursement from Alfred and Maria in the amount of $30,000 and entered

judgment accordingly. Alfred and Maria appeal from the trial court’s judgment

against them.

Sufficiency of the Evidence

Alfred and Maria assert that there

is no evidence or insufficient evidence to support the trial court’s findings

on fraud and damages. The

trial judge’s findings of fact in a bench trial have the same force and dignity

as a jury verdict and are reviewed under the same legal and factual sufficiency

standards. Catalina v. Blasdel , 881 S.W.2d 295, 297 (Tex. 1994).

As the trier of fact, the trial court was the sole judge of the credibility of

the witnesses and the weight to be given their testimony. See Iliff v. Iliff , 339 S.W.3d 74, 83 (Tex. 2011) (citing

Montgomery Indep .

Sch. Dist. v. Davis , 34

S.W.3d 559, 567 (Tex. 2000)); City

of Keller v. Wilson , 168 S.W.3d 802, 819 (Tex. 2005).

In conducting a legal-sufficiency review, we consider

whether the evidence at trial would enable reasonable and fair-minded people to

reach the verdict under review. City of Keller , 168 S.W.3d at 827 ; Wright v.

Wright , 280 S.W.3d 901, 908 (Tex. App.—Eastland 2009, no pet.) ( applying standards in divorce appeal involving fraud on the

community). We credit favorable evidence if a reasonable factfinder

could and disregard contrary evidence unless a reasonable factfinder

could not. City of Keller , 168 S.W.3d at 827 ; Wright , 280 S.W.3d at 908 . We review the evidence in the light

most favorable to the verdict and indulge every reasonable inference that

supports it. City of Keller , 168 S.W.3d at 822 ;

Wright , 280 S.W.3d at 908 . We will set aside the trial court’s finding

under this standard only if the record shows: (1) a complete absence of

evidence of a vital fact, (2) rules of law or evidence bar the court 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, or (4) the

evidence establishes conclusively the opposite of the vital fact. City of

Keller , 168

S.W.3d at 810 .

In conducting a factual-sufficiency review, we examine the

entire record, considering both the evidence in favor of, and contrary to, the

challenged finding. Cain v. Bain , 709 S.W.2d 175, 176 (Tex. 1986); Wright ,

280 S.W.3d at 908 . Under this standard, we set aside the fact finding

only if it is so contrary to the overwhelming weight of the evidence as to be

clearly wrong and unjust. Pool v. Ford Motor Co. , 715 S.W.2d 629, 635 (Tex. 1986);

Wright , 280 S.W.3d at 908 .

A. Fraud on the Community

Fraud on the community can be committed through actual or

constructive fraud. Strong v. Strong , 350 S.W.3d 759, 771 (Tex. App.—Dallas

2011, pet. filed). To establish actual fraud, Elizabeth had to show that Greg

and his parents (1) made a material misrepresentation (2) that they knew to be

false or made recklessly without any knowledge of the truth (3) with the intent

that she rely on it, (4) and she acted in reliance on the representation, (5) resulting

in her injury. See Perez v. DNT Global Star, L.L.C. ,

339 S.W.3d 692, 705 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ( citing Ernst & Young, L.L.P. v. Pac. Mut . Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001)). Constructive

fraud, on the other hand, does not require a showing of all of the elements of

actual fraud; it “may be shown if one spouse unfairly deprives the other spouse

of the benefit of community property.” [1]

Strong v. Strong , 350 S.W.3d 759, 771

(Tex. App.—Dallas 2011, pet. filed) (citing Wright

v. Wright , 280 S.W.3d 901 , 908–09 (Tex. App.—Eastland 2009, no pet.); see also Knight v. Knight , 301

S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2009, no pet.). Courts may consider

“fairness” factors in reviewing a spouse’s claim of constructive fraud against

the community: the size of the property disposed of in relation to the total

size of the community estate, the adequacy of the estate remaining to support

the innocent spouse after disposition of the divorce, and the relationship of

the parties involved in the transaction. See

Knight , 301 S.W.3d at 731 ; Massey v. Massey , 807 S.W.2d 391, 402

(Tex. App.—Houston [1st Dist.] 1991), writ

denied, 867 S.W.2d 766 (Tex. 1993).

Parents who conspire with their children to perpetrate a

fraud on the community estate of the children and their spouses may be held

liable in a divorce action to the extent of the property wrongfully obtained by

the parents. See Schlueter v. Schlueter ,

975 S.W.2d 584 , 589–90 (Tex. 1998) (holding that claim for fraud on community is

not independent cause of action and would not support punitive damages award

but could be considered in division of community property in divorce action; affirming

monetary award in divorce action against husband’s father based on transfer of community

assets to father immediately prior to divorce); Chu v. Hong , 249 S.W.3d 441, 445 (Tex. 2008) (“Hong notes correctly

that in Schlueter we did not decide whether

torts against the community estate could be alleged against a third-party.

As a general matter, they clearly can; if a third party steals community property, surely either spouse or both can

seek recovery in tort for it.”). Generally, the remedy available is limited to

recovery of the fraudulently obtained property or damages limited to the value

of the property transferred. See Chu , 249 S.W.3d at 446 (comparing common law remedies to

remedies under Uniform Fraudulent Transfer Act).

Elizabeth presented evidence at trial to

support her contention that Greg and his parents tricked her into making

payments out of the community estate toward the purchase and improvement of the

Kerrville property by leading her to believe that she and Greg had an ownership

interest in the property. She testified that she and Greg and his parents had

agreed to be partners in the purchase of the Kerrville property and that the

monthly payments she and Greg made to Charles Killebrew ,

the property’s former owner, were purchase payments. She placed in evidence

carbon copies of checks written to Killebrew , many of

which indicated that they were payments on a “lot note” or “land note.”

Greg admitted that the funds used

to make these payments were community funds. He testified that he and Elizabeth

made these payments to Killebrew on behalf of his

father because he owed his father money. He further testified that he and

Elizabeth made the final payment on the purchase note for the property, at

which time Killebrew released the lien on the

property. Greg admitted that there was nothing in writing to support his

contention that he owed his father money at the times he and Elizabeth made the

payments on the property note.

Alfred

testified that Greg and Elizabeth made the payments to Killebrew

as lease payments under a lease agreement between Greg and his parents. Elizabeth

testified that Greg and his parents did not tell her about the lease agreement until

she filed for divorce, when they claimed for the first time that her and Greg’s payments on the property were actually lease

payments. The lease agreement is dated November 1, 2000. It obligates Greg to

pay his parents $350 per month from November 1, 2000 through November 1, 2001.

Alfred testified that he could not recall how many $350 payments he received from

Greg during the term of the lease. The checks in the record reflecting payments

from Greg and Elizabeth’s community estate to Killebrew

are dated between 2002 and 2008 — all after

the lease expired. None of the checks in the record are in the amount of $350.

Elizabeth testified and provided

evidence that she and Greg paid for improvements to the Kerrville property,

such as building a road and having electricity and plumbing installed, but that

Alfred and Maria did not bear any of the expense for improving the property. She

also testified that she had discussed the Kerrville property with Greg, and

they had agreed that they were investing in the property. She testified that he

never told her that they were leasing the property.

In light of the evidence, the trial

court could reasonably have concluded that Greg and his parents “unfairly deprive[ d

Elizabeth] of the benefit of community property.” Strong , 350 S.W.3d at 771 . Her testimony

and exhibits at trial are some evidence that Greg and his parents misled her about the

ownership of the Kerrville property and that, as a result, she contributed

community funds to improve the property and pay off the purchase note on the

property. Although Greg, Alfred, and Maria disputed Elizabeth’s recitation of

the facts, the trial court, as the factfinder , was

the sole judge of the witnesses’ credibility and was free to credit Elizabeth’s

testimony and discredit Alfred’s and Maria’s testimony. See Iliff , 339 S.W.3d at 83 . Additionally,

the amount of the fraudulently obtained property, which the trial court

determined to be $30,000, is considerable in relation to the total size of the

community estate, which did not include a home or any other real property. See Knight , 301 S.W.3d at 731 (noting

that the court may consider the fairness of the transaction in terms of the

size of the property disposed of in relation to the total size of the community

estate); Massey , 807 S.W.2d at 402 (same).

We hold that the trial court’s fraud finding is supported by

more than a scintilla of evidence and is not so

contrary to the overwhelming weight of the evidence as to be clearly wrong and

unjust. See City of Keller , 168

S.W.3d at 810 ; Pool , 715

S.W.2d at 635 ; Wright , 280 S.W.3d at 908 ; see also Stevenson v. Koutzarov , 795 S.W.2d 313, 322 (Tex. App.—Houston

[1st Dist.] 1990, writ denied) (holding that there was legally sufficient

evidence of fraud on estate when friends sought reimbursement from husband for

expenditures allegedly for wife but evidence raised question of whether

expenditures were actually incurred for wife). We overrule Alfred and Maria’s

first issue.

B. Damages

The parties do not dispute that the

purchase price for the Kerrville property was $30,000, part of which was

reflected in a $26,500 purchase note. The check carbons in evidence establish that

Elizabeth and Greg made the following payments to Killebrew : $545.08 in November 2002, $272.54 in

January 2003, $545.08 in March 2003, $445.00 in August 2003, $408.81 in March

2004, $408.54 on an unknown date (with a check number coming after the March

2004 payment and before the February 2008 payment), and $741.12 in February

2008. But Elizabeth testified that she and Greg paid approximately $24,000 or

$25,000 to purchase the property in Kerrville. She testified that the checks in

evidence were only examples of the property payments they made because she

could not find any other check carbons.

Alfred testified that he and Maria

paid for the Kerrville property. As discussed above, he testified that the

payments made by Greg and Elizabeth were made on his and Maria’s behalf because

Greg owed him for lease payments. Neither Alfred nor Maria testified as to what

payments, if any, they made toward the purchase of the property directly.

The record also contains evidence

of expenditures on improvements to the Kerrville property paid for out of Greg

and Elizabeth’s community estate. Testimony and check carbons in the record

demonstrate payments of $200 toward procuring use of a septic tank for the

property and $300 for a well permit. Photos in evidence showed the deer blind

on the property. There was testimony and photographic evidence regarding a carport

Elizabeth and Greg built on the property that they could park a trailer under.

There was also evidence that they paid to have electricity installed at the

Kerrville property. Elizabeth testified that she and Greg spent more than

$25,000 on improvements to the Kerrville property.

As the sole judge of credibility, the trial court was free

to believe Elizabeth’s testimony that the community estate made payments of

$24,000 to $25,000 on the purchase note for the Kerrville property and to

disbelieve Alfred’s testimony that he and Maria paid the purchase price. See Iliff , 339

S.W.3d at 83 . While the parties disputed the purpose of the improvements

Elizabeth and Greg made to the Kerrville property, it was undisputed that

Elizabeth and Greg made improvements to the property. Elizabeth testified that

the community expended more than $25,000 in making such improvements, and no

party presented evidence contradicting that assertion.

Elizabeth’s testimony and exhibits relating to the amount of

the expenditures made by her and Greg’s estate on the Kerrville property and

improvements thereto is evidence of the value wrongfully obtained by Alfred and

Maria from the community estate. See Chu , 249 S.W.3d at 446 (observing that damages for conspiracy to defraud community estate are generally

limited to recovery of wrongfully obtained community property or its value). The trier of fact generally has

discretion to award damages within the range of evidence presented at trial. Gulf

States Utils . Co. v. Low , 79 S.W.3d 561, 566

(Tex. 2002) (citing Price Pfister , Inc. v. Moore

& Kimmey , Inc. , 48 S.W.3d 341, 352 (Tex. App.—Houston [14th Dist.] 2001, pet.

denied)). The evidence at trial ranged from $0, according to Alfred and Maria’s

testimony, to $50,000 according to Elizabeth’s testimony. The trial court’s

$30,000 damages finding falls within that range.

We therefore hold that the trial court’s damages award is supported

by more than a scintilla of evidence and is not so

contrary to the overwhelming weight of the evidence as to be clearly wrong and

unjust. See City of Keller , 168

S.W.3d at 810 ; Pool , 715

S.W.2d at 635 ; Wright , 280 S.W.3d at 908 ; see also Mazique v. Mazique ,

742 S.W.2d 805, 807 (Tex. App.—Houston [1st Dist.] 1987, no writ) (holding that

there was legally and factually sufficient evidence to support trial court’s

$30,000 award of damages based on fraud on community when award was “within the

range of the evidence showing the amount of cash that the appellant had taken

from the community funds, and for which no accounting was ever made.”). We overrule

Alfred and Maria’s second issue.

Conclusion

We hold

that the evidence is sufficient to support the trial court’s findings on fraud

and damages. We therefore affirm the trial court’s judgment.

Harvey

Brown

Justice

Panel

consists of Chief Justice Radack , Justices Higley and Brown.

[1] A fiduciary duty exists between a

husband and a wife as to their jointly controlled community estate. Knight v. Knight , 301 S.W.3d 723, 731 (Tex. App.—Houston

[14th Dist.] 2009, no pet.) ( citing Zieba v. Martin , 928 S.W.2d 782, 7890 (Tex.

App.—Houston [14th Dist.] 1996, no pet.)). The breach of this fiduciary

relationship constitutes a “fraud on the community”—a judicially created

concept based on constructive fraud. Id. Such conduct amounts to a

fraud, even when the evidence does not establish the elements of actual fraud,

because it violates the marital trust and has the effect of depriving one

spouse of an interest in jointly-owned property. Id.