1-1 By: Goodman (Senate Sponsor - Harris) H.B. No. 1245
1-2 (In the Senate - Received from the House April 4, 2001;
1-3 April 9, 2001, read first time and referred to Committee on
1-4 Jurisprudence; May 1, 2001, reported favorably, as amended, by the
1-5 following vote: Yeas 6, Nays 0; May 1, 2001, sent to printer.)
1-6 COMMITTEE AMENDMENT NO. 1 By: Brown
1-7 Amend H.B. No. 1245 as follows:
1-8 1. On page 1, strike line 63 and on page 2, strike lines 1-3, and
1-9 substitute the following: "subtracting from the fair market value
1-10 of the property as of a specific date the amount of a lawful lien
1-11 specific to the property on that same date."
1-12 2. On page 2, line 19, strike the word "lien" and replace with
1-13 the word "debt."
1-14 3. Page 4 strike lines 57-64 and substitute the following:
1-15 Sec. 3.410. EFFECT OF MARITAL PROPERTY AGREEMENTS. A
1-16 premarital or marital property agreement, whether executed before,
1-17 on, or after the effective date of this subchapter, which satisfies
1-18 the requirements of Chapter 4 is effective to waive, release,
1-19 assign, or partition a claim for economic contribution under this
1-20 subchapter to the same extent the agreement would have been
1-21 effective to waive, release, assign, or partition a claim for
1-22 reimbursement under the law as it existed immediately before the
1-23 effective date of the initial enactment of this subchapter of
1-24 September 1, 1999, unless the agreement provides otherwise.
1-25 4. Page 5 strike lines 46-49 and substitute the following:
1-26 (2) order that a claim for an economic contribution by
1-27 one separate marital estate of a spouse to the community marital
1-28 estate of the spouses be awarded to the owner of the contributing
1-29 separate marital estate; and
1-30 5. On page 6 strike lines 1-4 and substitute the
1-31 following:
1-32 (c) Section 3.410, Family Code, as added by this Act,
1-33 applies to a premarital property agreement or marital property
1-34 agreement executed on or after the effective date of this
1-35 subchapter of September 1, 1999.
1-36 A BILL TO BE ENTITLED
1-37 AN ACT
1-38 relating to the relationship between separate and community
1-39 property during a marriage.
1-40 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-41 SECTION 1. PUBLIC POLICY. In accordance with the duty of the
1-42 legislature under Section 15, Article XVI, Texas Constitution, to
1-43 pass laws more clearly defining the rights of spouses in relation
1-44 to separate and community property, the legislature declares that,
1-45 under certain circumstances, the economic contributions to the
1-46 value of property during marriage made by one marital estate for
1-47 the benefit of another marital estate create a claim for economic
1-48 contribution for the contributing marital estate in the property of
1-49 the benefited estate as provided by Subchapter E, Chapter 3, Family
1-50 Code.
1-51 SECTION 2. AMENDMENT. Subchapter E, Chapter 3, Family Code,
1-52 is amended to read as follows:
1-53 SUBCHAPTER E. CLAIMS FOR ECONOMIC CONTRIBUTION AND REIMBURSEMENT
1-54 [EQUITABLE INTEREST OF COMMUNITY ESTATE IN ENHANCED
1-55 VALUE OF SEPARATE PROPERTY]
1-56 Sec. 3.401. DEFINITIONS. In this subchapter:
1-57 (1) "Claim for economic contribution" means a claim
1-58 made under this subchapter.
1-59 (2) "Economic contribution" means the contribution to
1-60 a marital estate described by Section 3.402.
1-61 (3) "Equity" means, with respect to specific property
1-62 owned by one or more marital estates, the amount computed by
1-63 subtracting from the present fair market value of the property the
2-1 amount of a lawful lien specific to the property on the date of
2-2 dissolution of the marriage, death of a spouse, or disposition of
2-3 the property.
2-4 (4) "Marital estate" means one of three estates:
2-5 (A) the community property owned by the spouses
2-6 together and referred to as the community marital estate;
2-7 (B) the separate property owned individually by
2-8 the husband and referred to as a separate marital estate; or
2-9 (C) the separate property owned individually by
2-10 the wife, also referred to as a separate marital estate.
2-11 (5) "Spouse" means a husband, who is a man, or a wife,
2-12 who is a woman. A member of a civil union or similar relationship
2-13 entered into in another state between persons of the same sex is
2-14 not a spouse.
2-15 Sec. 3.402. ECONOMIC CONTRIBUTION. (a) For purposes of this
2-16 subchapter, "economic contribution" is the dollar amount of:
2-17 (1) the reduction of the principal amount of a debt
2-18 secured by a lien on property owned before marriage, to the extent
2-19 the lien existed at the time of marriage;
2-20 (2) the reduction of the principal amount of a debt
2-21 secured by a lien on property received by a spouse by gift, devise,
2-22 or descent during a marriage, to the extent the debt existed at the
2-23 time the property was received;
2-24 (3) the reduction of the principal amount of that part
2-25 of a debt, including a home equity loan:
2-26 (A) incurred during a marriage;
2-27 (B) secured by a lien on property; and
2-28 (C) incurred for the acquisition of, or for
2-29 capital improvements to, property;
2-30 (4) the reduction of the principal amount of that part
2-31 of a debt:
2-32 (A) incurred during a marriage;
2-33 (B) secured by a lien on property owned by a
2-34 spouse;
2-35 (C) for which the creditor agreed to look for
2-36 repayment solely to the separate marital estate of the spouse on
2-37 whose property the lien attached; and
2-38 (D) incurred for the acquisition of, or for
2-39 capital improvements to, property;
2-40 (5) the refinancing of the principal amount described
2-41 by Subdivisions (1)-(4), to the extent the refinancing reduces that
2-42 principal amount in a manner described by the appropriate
2-43 subdivision; and
2-44 (6) capital improvements to property other than by
2-45 incurring debt.
2-46 (b) "Economic contribution" does not include the dollar
2-47 amount of:
2-48 (1) expenditures for ordinary maintenance and repair
2-49 or for taxes, interest, or insurance; or
2-50 (2) the contribution by a spouse of time, toil,
2-51 talent, or effort during the marriage.
2-52 Sec. 3.403. CLAIM BASED ON ECONOMIC CONTRIBUTION. (a) A
2-53 marital estate that makes an economic contribution to property
2-54 owned by another marital estate has a claim for economic
2-55 contribution with respect to the benefited estate.
2-56 (b) The amount of the claim under this section is equal to
2-57 the product of:
2-58 (1) the equity in the benefited property on the date
2-59 of dissolution of the marriage, the death of a spouse, or
2-60 disposition of the property; multiplied by
2-61 (2) a fraction of which:
2-62 (A) the numerator is the economic contribution
2-63 to the property by the contributing estate; and
2-64 (B) the denominator is an amount equal to the
2-65 sum of:
2-66 (i) the economic contribution to the
2-67 property by the contributing estate;
2-68 (ii) the equity in the property as of the
2-69 date of the marriage or, if later, the date of the first economic
3-1 contribution by the contributing estate; and
3-2 (iii) the economic contribution to the
3-3 property by the benefited estate during the marriage.
3-4 (c) The amount of a claim under this section may be less
3-5 than the total of the economic contributions made by the
3-6 contributing estate, but may not cause the contributing estate to
3-7 owe funds to the benefited estate.
3-8 (d) The amount of a claim under this section may not exceed
3-9 the equity in the property on the date of dissolution of the
3-10 marriage, the death of a spouse, or disposition of the property.
3-11 (e) The use and enjoyment of property during a marriage for
3-12 which a claim for economic contribution to the property exists does
3-13 not create a claim of an offsetting benefit against the claim.
3-14 [ENHANCEMENT IN VALUE DUE TO FINANCIAL CONTRIBUTION OF COMMUNITY
3-15 PROPERTY. (a) The enhancement in value during a marriage of
3-16 separate property owned by a spouse due to a financial contribution
3-17 made with community property creates an equitable interest of the
3-18 community estate in the separate property.]
3-19 [(b) The equitable interest created under this section is
3-20 measured by the net amount of the enhancement in value of the
3-21 separate property during the marriage due to the financial
3-22 contribution made with community property.]
3-23 [Sec. 3.402. USE OF COMMUNITY PROPERTY TO DISCHARGE DEBT ON
3-24 SEPARATE PROPERTY. (a) The use of community property to discharge
3-25 all or part of a debt on separate property owned by a spouse during
3-26 a marriage creates an equitable interest of the community estate in
3-27 the separate property.]
3-28 [(b) The equitable interest created under Subsection (a) in
3-29 the enhanced value of separate property due to financial
3-30 contributions made with community property is computed by
3-31 multiplying the net enhanced value of the separate property by the
3-32 sum created by dividing:]
3-33 [(1) the total amount of the payments made by the
3-34 community estate to reduce the principal of the debt on the
3-35 separate property; by]
3-36 [(2) the sum of:]
3-37 [(A) the amount computed under Subdivision (1);]
3-38 [(B) the total amount of the payments made by
3-39 the separate estate to reduce the principal on the debt; and]
3-40 [(C) the total amount of any additional amount
3-41 spent by the separate estate to acquire the interest in the
3-42 property.]
3-43 [(c) For purposes of this section, the cost of any
3-44 improvements made to the separate property paid for by either the
3-45 separate or community estate is included as part of the principal
3-46 of the debt.]
3-47 Sec. 3.404 [3.403]. APPLICATION OF INCEPTION OF TITLE RULE;
3-48 OWNERSHIP INTEREST NOT CREATED. (a) This subchapter does not
3-49 affect the rule of inception of title under which the character of
3-50 property is determined at the time the right to own or claim the
3-51 property arises [is acquired].
3-52 (b) The claim for economic contribution [equitable interest]
3-53 created under this subchapter does not create an ownership interest
3-54 in property, but does create a claim against the property of the
3-55 benefited estate by the contributing estate. The claim matures on
3-56 dissolution of the marriage or the death of either spouse.
3-57 Sec. 3.405 [3.404]. MANAGEMENT RIGHTS. This subchapter does
3-58 not affect the right to manage, control, or dispose of marital
3-59 property as provided by this chapter. [EQUITABLE INTEREST OF
3-60 SEPARATE PROPERTY ESTATE. (a) The separate estate of a spouse has
3-61 an equitable interest in the enhanced value of the separate estate
3-62 of the other spouse or in the enhanced value of the community
3-63 estate for:]
3-64 [(1) a financial contribution made to the other
3-65 separate estate or to the community estate; and]
3-66 [(2) the discharge of all or part of a debt of the
3-67 other separate estate or of the community estate.]
3-68 [(b) The equitable interest created by this section is
3-69 measured in the manner provided by Section 3.401(b) or 3.402(b), as
4-1 appropriate.]
4-2 [Sec. 3.405. USE AND ENJOYMENT OF PROPERTY. The use and
4-3 enjoyment of property during a marriage does not create a claim of
4-4 offsetting benefits to the equitable interest created by this
4-5 subchapter.]
4-6 Sec. 3.406. EQUITABLE LIEN. (a) On dissolution [termination]
4-7 of a marriage, the court shall impose an equitable lien on property
4-8 of a marital estate [community or separate property] to secure a
4-9 claim for economic contribution in that property by another marital
4-10 estate [arising by reason of an equitable interest as provided by
4-11 this subchapter].
4-12 (b) On the death of a spouse, a court shall, on application
4-13 for a claim of economic contribution brought by the surviving
4-14 spouse, the personal representative of the estate of the deceased
4-15 spouse, or any other person interested in the estate, as defined by
4-16 Section 3, Texas Probate Code, impose an equitable lien on the
4-17 property of a benefited marital estate to secure a claim for
4-18 economic contribution by a contributing marital estate.
4-19 (c) Subject to homestead restrictions, an equitable lien
4-20 under this section may be imposed on the entirety of a spouse's
4-21 property in the marital estate and is not limited to the item of
4-22 property that benefited from an economic contribution.
4-23 Sec. 3.407. OFFSETTING CLAIMS. The court shall offset a
4-24 claim for one marital estate's economic contribution in a specific
4-25 asset of a second marital estate against the second marital
4-26 estate's claim for economic contribution in a specific asset of the
4-27 first marital estate.
4-28 Sec. 3.408. CLAIM FOR REIMBURSEMENT. (a) A claim for
4-29 economic contribution does not abrogate another claim for
4-30 reimbursement in a factual circumstance not covered by this
4-31 subchapter. In the case of a conflict between a claim for economic
4-32 contribution under this subchapter and a claim for reimbursement,
4-33 the claim for economic contribution, if proven, prevails.
4-34 (b) A claim for reimbursement includes:
4-35 (1) payment by one marital estate of the unsecured
4-36 liabilities of another marital estate; and
4-37 (2) inadequate compensation for the time, toil,
4-38 talent, and effort of a spouse by a business entity under the
4-39 control and direction of that spouse.
4-40 (c) The court shall resolve a claim for reimbursement by
4-41 using equitable principles, including the principle that claims for
4-42 reimbursement may be offset against each other if the court
4-43 determines it to be appropriate.
4-44 (d) Benefits for the use and enjoyment of property may be
4-45 offset against a claim for reimbursement for expenditures to
4-46 benefit a marital estate on property that does not involve a claim
4-47 for economic contribution to the property.
4-48 Sec. 3.409. NONREIMBURSABLE CLAIMS. The court may not
4-49 recognize a marital estate's claim for reimbursement for:
4-50 (1) the payment of child support, alimony, or spousal
4-51 maintenance;
4-52 (2) the living expenses of a spouse or child of a
4-53 spouse;
4-54 (3) contributions of property of a nominal value;
4-55 (4) the payment of a liability of a nominal amount; or
4-56 (5) a student loan owed by a spouse.
4-57 Sec. 3.410. EFFECT OF MARITAL PROPERTY AGREEMENTS. A
4-58 premarital or marital property agreement that satisfies the
4-59 requirements of Chapter 4 is effective to waive, release, assign,
4-60 or partition a claim for economic contribution under this
4-61 subchapter to the same extent the agreement would have been
4-62 effective to waive, release, assign, or partition a claim for
4-63 reimbursement under the law as it existed immediately before
4-64 September 1, 2001, unless the agreement provides otherwise.
4-65 SECTION 3. CONFORMING AMENDMENT. Section 3.006, Family Code,
4-66 is amended to read as follows:
4-67 Sec. 3.006. PROPORTIONAL OWNERSHIP OF PROPERTY BY MARITAL
4-68 ESTATES. [(a)] If the community estate of the spouses and the
4-69 separate estate of a spouse have an ownership interest in property,
5-1 the respective ownership interests of the marital estates are
5-2 determined by the rule of inception of title.
5-3 [(b) An equitable interest created by Subchapter E:]
5-4 [(1) does not create an ownership interest in a
5-5 spouse's separate property; and]
5-6 [(2) creates a claim against the spouse who owns the
5-7 property that matures on termination of the marriage.]
5-8 SECTION 4. CONFORMING AMENDMENT. Section 7.002, Family Code,
5-9 is amended to read as follows:
5-10 Sec. 7.002. DIVISION OF PROPERTY UNDER SPECIAL
5-11 CIRCUMSTANCES. In addition to the division of the estate of the
5-12 parties required by Section 7.001, in a decree of divorce or
5-13 annulment the court shall order a division of the following real
5-14 and personal property, wherever situated, in a manner that the
5-15 court deems just and right, having due regard for the rights of
5-16 each party and any children of the marriage:
5-17 (1) property that was acquired by either spouse while
5-18 domiciled in another state and that would have been community
5-19 property if the spouse who acquired the property had been domiciled
5-20 in this state at the time of the acquisition; or
5-21 (2) property that was acquired by either spouse in
5-22 exchange for real or personal property and that would have been
5-23 community property if the spouse who acquired the property so
5-24 exchanged had been domiciled in this state at the time of its
5-25 acquisition[; or]
5-26 [(3) the equitable interest, as provided by Subchapter
5-27 E, Chapter 3, of the:]
5-28 [(A) community estate in the separate estate of
5-29 a spouse;]
5-30 [(B) separate property of a spouse in the
5-31 separate property of the other spouse; and]
5-32 [(C) separate estate of a spouse in the
5-33 community estate].
5-34 SECTION 5. CONFORMING AMENDMENT. Chapter 7, Family Code, is
5-35 amended by adding Section 7.007 to read as follows:
5-36 Sec. 7.007. DISPOSITION OF CLAIM FOR ECONOMIC CONTRIBUTION
5-37 OR CLAIM FOR REIMBURSEMENT. (a) In a decree of divorce or
5-38 annulment, the court shall determine the rights of both spouses in
5-39 a claim for economic contribution as provided by Subchapter E,
5-40 Chapter 3, and in a manner that the court considers just and right,
5-41 having due regard for the rights of each party and any children of
5-42 the marriage, shall:
5-43 (1) order a division of a claim for economic
5-44 contribution of the community marital estate to the separate
5-45 marital estate of one of the spouses;
5-46 (2) order that a claim for economic contribution of
5-47 one separate marital estate in the community marital estate of the
5-48 other spouse be awarded to the owner of the separate marital
5-49 estate; and
5-50 (3) order that a claim for economic contribution of
5-51 one separate marital estate in the separate marital estate of the
5-52 other spouse be awarded to the owner of the contributing marital
5-53 estate.
5-54 (b) In a decree of divorce or annulment, the court shall
5-55 determine the rights of both spouses in a claim for reimbursement
5-56 as provided by Subchapter E, Chapter 3, and shall apply equitable
5-57 principles to:
5-58 (1) determine whether to recognize the claim after
5-59 taking into account all the relative circumstances of the spouses;
5-60 and
5-61 (2) order a division of the claim for reimbursement,
5-62 if appropriate, in a manner that the court considers just and
5-63 right, having due regard for the rights of each party and any
5-64 children of the marriage.
5-65 SECTION 6. EFFECTIVE DATE; TRANSITION. (a) This Act takes
5-66 effect September 1, 2001.
5-67 (b) The change in law made by this Act applies to a suit for
5-68 dissolution of a marriage or annulment pending on the effective
5-69 date of this Act or filed on or after that date.
6-1 (c) Section 3.410, Family Code, as added by this Act,
6-2 applies to a premarital property agreement or marital property
6-3 agreement executed before, on, or after the effective date of this
6-4 Act.
6-5 * * * * *