Interspousal loans - separate vs. community property (and debt)

Loan from one spouse to the other and community-property presumption. Tricky issue in property division upon divorce.

PROMISSORY NOTE BETWEEN SPOUSES

Husband asserts wife's summary judgment evidence did not overcome the presumption that the note was community property and the debt it evidenced was a "community debt." Property possessed by either spouse during marriage is presumed to be community property. Tex. Fam. Code Ann. § 3.003(a) (West 2006); Fillingim v. Fillingim, 332 S.W.3d 361, 363 (Tex. 2011). This presumption is rebuttable by clear and convincing evidence to the contrary. Tex. Fam. Code Ann. § 3.003 (West 2006).

In the note, husband unequivocally recited the money he borrowed from wife, as evidenced by the note, was her separate property. This recitation sufficiently rebuts the presumption of community property and creates a new presumption that the funds loaned by wife to husband were wife's separate property. Kyles v. Kyles, 832 S.W.2d 194, 196 (Tex.App.-Beaumont 1992, no pet.) (recitations of separate property character in deeds displaced community presumption and created new presumption of separate property) (citing Henry S. Miller Company v. Evans, 452 S.W.2d 426, 430-31 (Tex. 1970)); Licata v. Licata, 11 S.W.3d 269, 274 (Tex.App.-Houston [14th Dist.] 1999, pet. denied) (applying holding regarding new presumption of separate property to settlement proceeds based on recitations in settlement documents); see Henry S. Miller Company, 452 S.W.2d at 430-31 (because of recitals in deed that land was conveyed to wife as her sole and separate property and consideration was from her separate estate, no community presumption existed). The recital in the note of separate property was prima facie evidence that the money loaned, as evidenced by the note, was the separate property of wife. See Licata, 11 S.W.3d at 274 (citing Kyles, 832 S.W.3d at 196); Henry S. Miller Company, 452 S.W.2d at 430 (separate property character recitals in deed to wife established prima facie defense of separate property). Cf. Kahn v. Kahn, 94 Tex. 114, 58 S.W. 825, 825-26 (1900) (absent proof of fraud or mistake husband bound by recitals in his deed to wife regarding payment of consideration by wife from separate funds); Roberts v. Roberts, 999 S.W.2d 424, 432 (Tex.App.-El Paso 1999, no pet.) (similarly stating rule).

With the recitals in his promissory note to wife, the burden then shifted to husband to come forward with more than a scintilla of evidence tending to rebut the separate property presumption. Licata 11 S.W.3d at 274; see Landaverde v. Estate of Abedinzadeh, No. 14-11-0143-CV, 2011 Tex. App. Lexis 8668, at *4-5 (Tex.App.-Houston [14th Dist.] Nov. 1, 2011, no pet.) (on summary judgment party resisting a presumption must produce evidence sufficient to neutralize effect of presumption in order for case to proceed to trial). Absent such evidence, the separate property presumption becomes conclusive. See Licata, 11 S.W.3d at 274 (citing Kyles, 832 S.W.2d at 196). 

The characterization of the note as separate or community property is determined by the inception of title rule. Tex. Fam. Code Ann. § 3.006 (West 2006). As executed and delivered, the note with its recitals raised the presumption that the funds advanced, and thus the note representing those funds, was the separate property of wife. The uses to which husband later put the funds are not pertinent to the note's characterization.

SOURCE: Amarillo Court of Appeals - No. 07-11-00223-CV – 2/21/2013