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The Texas community property system provides that upon divorce, the trial court must enter a division of a married couple's estate "in a manner that the court deems just and right," considering the rights of the parties and any children of the marriage. Tex. Fam. Code Ann. § 7.001. Such a standard may at times lead to a disproportionate division of assets and liabilities of the parties, depending on the circumstances that courts may consider in refusing to divide the marital estate equally.
Petitioner Richard and respondent Karen Schlueter got married in 1969. In 1992, petitioner began investing in emus. He contributed in the community funds toward two pairs of the birds, but eventually sold his interest to his father, petitioner Hudson Schlueter. Respondent did not know the details of the business and did not find out that petitioner husband had sold his interest to her father-in-law until after her husband filed for divorce. Shortly before he filed for divorce, petitioner accepted a check from his employer as an incentive for early retirement. He turned the check over to his father for deposit in his father's account. His father then wrote himself a check allegedly to reimburse past loans to petitioner. About a week later, petitioner filed for divorce. Petitioner transferred various community assets to his father shortly before he filed for divorce. Respondent counterclaimed for divorce and brought independent tort claims against her petitioners, seeking damages for fraud, breach of fiduciary duty, and conspiracy. The trial court ordered a disproportionate division of the community estate favoring the respondent, and rendered judgment for her against petitioners for actual and exemplary damages. The appellate court affirmed holding that a tort cause of action for fraud on the community exists independent of a divorce proceeding. Petitioner challenged the judgment.
Did the lower court err in holding that a tort cause of action for fraud on the community exists independent of a divorce proceeding?
The court reversed the lower court's judgment against petitioners for actual and exemplary damages and attorney's fees on respondent's crossclaim for divorce, holding that there was no independent tort cause of action between spouses for damages to the community estate, and remanded the cause to the trial court for a new property division, while affirming the remainder of the lower court's judgment. The court explained that no independent tort cause of action between the spouses was available for damages to the community estate due to fraud on the community because an adequate remedy existed through the just and right property division on divorce. Thus, because there exists no independent tort cause of action, the respondent could not recover punitive damages, but if she could prove the heightened culpability of actual fraud, the trial court could consider it in the just and right property division. The court concluded that the lower court correctly decided to admit into evidence a copy of the decree from petitioner husband's brother's divorce.